When I started this tips for first home buyers series I promised 30 tips and we have hit that mark. I hope you have found the tips delivered instructive and you feel more knowledgeable and confident as you set out to buy your first home.
But as I have been writing more ideas and tips have surfaced and for a while now it has been clear that delivering 30 tips is not end (its more of a beginning). So today, I deliver 2 bonus tips and moving forward I will be sharing more content that will help First Home Buyers, and in fact all buyers, as they look to buy homes or even investment properties. You can also expect content on a wide variety of related matter.
Anyway back to the bonus Tips…
Tip 31: Build a Buffer
As you look to buy your first home the focus is all on the steps that lead to the purchase of that home so it is easy to forget that it is just the start of the journey – not the destination. It’s a lot like having kids. The birth of your child may be the climax of the pregnancy but only the start of the journey as parents – the real work now begins.
So in the course of buying your first home you need to be thinking beyond the purchase. You want to make sure that the loan you take is affordable. Both based on your incomes now and as they might be at every step along the way.
Of course life is unpredictable and there are no guarantees that things will go to plan (in fact you can probably guarantee it won’t). So how do you protect against the vagaries that life may throw at you? You can get insurance to guard against some of the risks (illness & death) but just as important is putting yourself in a financial position that allows you to manage unexpected eventualities (loss of a job or sudden changes in plans).
To this end, I encourage all clients to hold enough savings to cover 6 months loan repayments and minimum living costs.
For first home buyers it is often not possible for them to purchase a home and have these savings up their sleeves at the outset (although 1-2 months buffer may be achievable). So it is about starting to build up this nest egg as soon as possible post purchase. This buffer helps self insure against the loss of a job or income whether that comes about by choice or it is forced upon you.
Knowing you have savings up your sleeve will give you peace of mind and allow you to sleep better knowing that rising interest rates or a fall in income does not spell immediate doom. You have time to deal with things and make appropriate plans.
Tip 32: Get a mortgage broker
The last 31 tips all bring us to this point. Having the support, guidance and expertise of a skilled mortgage broker will make buying your first home far easier and less stressful. It will also reduce the chances of making major errors along the way.
Most brokers do not charge for their services, but even if they do, their fees are small in comparison to the value they deliver. Brokers sit at the centre of the home buying journey and are often THE trusted source of information, with an understanding of all the parts of the process.
The trust that consumers have in brokers is evidenced by the growing use of brokers year on year. When I became a mortgage broker in 2002, brokers wrote only around 15-18% of all home loans. Now in 2024 brokers write over 70% of all home loans. That growth has happened despite efforts by some of the biggest businesses in Australia (the banks) seeking to resist that trend. One senior banker I spoke with many years ago predicted that brokers would one day write 90% of all loans…that moment is less than 10 yrs away at the current rate of progress.
In the early days clients came to me shopping for the cheapest rate. As the 31 preceding tips show, the role of the broker encompasses so much more and clients are quick to realise this.
The help that brokers provide does not conclude when a home purchase settles. Good brokers will regularly be in touch in the years that follow to answer questions, ensure the loan is still the most suitable and guide you along your way.
When looking for a mortgage broker here are some things to look out for or ask them:
- How many years have they been a broker? What did they do before they were a broker?
- What are their qualifications? A broker should at least have a Diploma in Finance (not just a Certificate 4)
- How many lenders are on their panel and how many have they used in the last 12 months? (you would want to see at least 25 lenders on a panel and for them to have used at least 8 lenders (and ideally 12+ lenders) in the last 12 months.
- Are they members of either Mortgage & Finance Association of Australia (MFAA) or Finance Broking Association of Australia (FBAA)? Only deal with a broker who is a member of one of these bodies as they impose minimum standards of qualification, on going education and a range of other requirements aimed at protecting consumers
- Look at testimonials in places other than their website – How many do they have? What is their overall rating?
So that is the end of the 30 Tips for First Home Buyers Series but stay tuned for more content that will help you as you set you to buy your first home and pay off the home loan that you needed to go with it.
To read the rest of our 30 tips for first home buyers series, amongst other great tips and advice, click here.
