“For a first-home owner buying in Sydney, it’s not easy. If that’s where you want to live you possibly should look at other options, which could be investing elsewhere.” SMH 20/11/15
As we all know it’s getting harder for first home buyers to enter the property market. So the key question is….are you better off buying an investment property now or keep saving to buy a home later on?
Do we buy an investment property now?
Buying an investment property can be a cheaper way to enter the market – especially if you can live with family rent and board free.
Many things are tax deductible, including agent fees, insurance, body corporate fees, rates, interest and repairs. Plus, you can also claim depreciation.
Importantly, you must buy at the right price and low interest rates helps you pay the investment loan off. This means you can build equity in the property and use this to buy your next investment property or home.
Do we buy our own home now?
If you can afford to buy your own home in an area you want to live – then there are some definite advantages. Of course there’s stability and enjoyment of owning your own place, you might also be eligible for a first-home-buyer’s grant or stamp duty concessions.
Buying you own home to live-in helps you avoid some of the risks of investment properties.
Things like buying in an area you don’t know, not getting bad tenants or having time with no tenants. You also don’t have to pay for landlords’ insurance, agent fees, and capital gains tax when you sell.
How to avoid paying lenders mortgage insurance
Lenders mortgage insurance helps you purchase your home or investment property when you don’t have a large deposit.
Unfortunately, lenders’ mortgage insurance does not protect you…. it protects the bank in case you default on your home loan or investment loan.
If you have to pay lenders mortgage insurance, it can be added to your loan, or ‘capitalised’, so you don’t have to pay the extra cost from your own pocket. But it important to know you will pay interest on this amount over the term your loan.
The best way to avoid paying lenders’ mortgage insurance is to have 20% deposit but most people don’t have this much.
Another option is a Family Guarantee. This allows a family member, like your parents, to use the equity in their home as security for your new home loan or investment loan. There is some risk for the guarantors so please see the following article for further information on this: Risks for parents as guarantors
Top 5 tips to buying your first property
Buying your first home or investment property is an exciting time. And there’s a lot to get your head around – how much deposit do you need, how much can you borrow, what are your monthly repayments.
Here’s the Top 5 Tips to buying your first property….
- Understand all the costs to buy
- Work out how much you can borrow based on your incomes and expenses
- Set your budget so you know your target purchase price
- Arrange pre-approval so you are ready to buy
- Do lots of research or ask an expert to help you