With the constant stream of people telling you that you will never be able to afford to buy your own home, you can hardly be blamed for actually starting to believe that. But here's why you should dig your toes in instead and prove everyone wrong! Unless you are happy to be a quitter?
It is true that it is not easy to buy your first property, but it is incredibly important that you do, if you want to have any quality of life by the time you enter retirement. Why? Because rents will continue to rise over the long term, but if you buy a home and pay that off over time, then you will eventually end up living in a mortgage-free home which means that you will have much more available cash than if you were renting that same property.
Henry Ford has a famous quote that says 'Whether you think you can, or think you can't, either way you are right'.
If you actually believe that you will never be able to buy your own home, then you are highly unlikely to even try to save the deposit needed.
If you don't try, then you will absolutely fail. However, if you are determined to make it happen, then as long as you don't give up, you will eventually get there.
You don't have to have a high income either - it is quite common for people on lower incomes to be much better with their money management than people on higher incomes. Why? Because they have no choice. They need to be smart with their money, because there just isn't enough to be frivolous.
It's more often the small $5 and $10 transactions that end up draining your bank account than the larger expenses. Plugging those gaps is often actually quite painless too, if you have the right tools in place.
Here are some tips:
- Call your Kiwisaver provider to find out how much you have in your Kiwisaver fund, and how long it will be before you can access that to help fund your deposit on a home.
- See if you qualify for any government grants.
- Have a look at where your money goes, and learn how to maximise your income to boost your savings plan
- Speak to an independent mortgage advisor to work out how much you can borrow based on your income and available deposit (you might not meet your bank's lending criteria, so an independent mortgage advisor can help to match you with the right bank to increase your chances of getting a loan approved).
- When you are in a position to start looking for a home, be realistic. Your first home is unlikely to be your dream home. Think of it as being a stepping stone, not the final step. Make sure that you can afford the mortgage payments if/when interest rates rise. You might find that your first step is an investment property rather than a home, depending on your starting financial position and where you want to live.
- Research the market that you are looking in to ensure that you don't pay too much. Fixer-uppers can be a great way to increase your equity in a property to help you to get up to the next rung on the ladder, especially when capital growth slows down. So don't rule something out just because it's not decorated to your personal taste, or because it needs a bit of love. However, be careful not to bite off more than you can chew. There is nothing worse than getting half way through a renovation and running out of money.
- When you find a property that is of interest to you, don't scrimp on your due diligence! It is much better to spend money on a building inspection (for example) to find out that you shouldn't buy that house, rather than saving that money and hoping for the best only to discover after you have bought it that you are now the not-so-proud owner of an absolute lemon.
- Learn as much as you can about the process of money management, negotiation, and buying a property, so that you can avoid the common mistakes that most people make the first time around.
Debbie Roberts is an investment coach for Property Apprentice.
It's teamed up with one of NZ's leading Mortgage Advisors to provide a free 1-hour training webinar to increase your knowledge and give you some tools to help you to get into your first property.
