A rollercoaster year has ended with a huge bump in first-time buyers entering the market around the country.

Over the September quarter in 2020 the number of first-home buyers increased to 36,687, an increase of 36.1% compared to the September quarter in 2019.

There has been a substantial change in market sentiment over the past few months, resulting in strong buyer interest and activity.

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Lloyd Edge, Director of Aus Property Professionals and author of Positively Geared marks the trend as an exciting time, but also heeds that aspiring buyers who don't want to miss out to take the necessary steps before taking the leap.

Lloyd Edge discusses things you never knew about being a homeowner. Picture: Supplied
Lloyd Edge discusses things you never knew about being a homeowner. Picture: Supplied

"It's exciting to see so many first-home buyers enter the market and begin their property journey. As it's their first foray into ownership, I believe they will need a helping hand, as there are a number of things to consider in order to make home ownership as successful as possible," Mr Edge said.

There are a lot of things you may not know about being a homeowner that you need to educate yourself on before making the biggest investment you'll have ever made in your life.

With so many first-home buyers entering the market, it's important to educate yourself, as there are a number of things to consider e.g. home loans, tax and insurance considerations, long-term equity, sustainable options and more.

Here is the Director of Aus Property Professionals' steps that first-home buyers should take before buying.

One of Lloyd Edge’s investment properties. Picture: Supplied
One of Lloyd Edge’s investment properties. Picture: Supplied

Compare home loans and don't be afraid to refinance your mortgage

A home loan is a long-term debt, so even a small difference in interest adds up over time. With interest rates at incredibly low levels and banks in competitive mode, keep your options open.

At the moment, I generally urge people to forgo a fixed rate and look for a variable rate, as you can't refinance on a fixed rate without paying breakage fees.

It's important to remember that you can never really beat the bank at their own game - they will foresee something that you can't see so it's best not to get locked in for a long period of time (example three years).

It's also important to avoid paying more for 'nice-to-have options' - is it worth paying extra for features you may never use? Make sure the loan suits your lifestyle.

 

Tax time is your friend - be aware of all of the available claims

While most people are aware of some tax deductions, a significant proportion don't claim what they're entitled to, or they don't claim correctly.

For example, you can claim the interest you're paying to the bank, all of the expenses for the property, (example: water bills, strata, certain repairs and tenancy costs if you're an investor).

Also, once you purchase a property, hire a registered quantity surveyor so they can put together a depreciation schedule for you and you can then claim assets in the property e.g. lifetime of a rangehood, air conditioner, carpet and blinds.

The biggest depreciation occurs in new properties. Hire a trusted accountant, as you can potentially save thousands of dollars.

Aus Property Professionals’ Lloyd Edge originally was a music teacher before he moved into the property world. Picture: Supplied
Aus Property Professionals’ Lloyd Edge originally was a music teacher before he moved into the property world. Picture: Supplied

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Manage risk through insurance cover

The type of insurance required will depend on your specific situation, but I always advise people to never try to save on costs by cutting back on insurance and to always get at least two-three quotes.

If you're an investor, take out landlord insurance which will cover your property, as well as fixtures and fittings.

Depending on the policy, it can also cover you for liability (example: damage by pets or tenants and can compensate you for loss of rental income if the property is severely damaged). If you're a homeowner, take out building insurance (or homeowners insurance) as it covers your home from fire, storm damage and floods.

If you live in a strata title apartment, the building will be covered by residential strata insurance. Lastly, take out contents insurance, as it will cover the repair or replacement of your possessions inside your home.

Alternative energy could increase the value of your property.
Alternative energy could increase the value of your property.

Look into sustainable alternatives

If you haven't considered solar, now it's time. There are a number of solar rebates available, so make sure you look into the options, as it varies state by state.

If you're a landlord, this will bode well with tenants as it will mean less bills and you can potentially increase your rent.

Looking at it long-term, it will increase the value of the property and add equity straight away. Also, switching to energy-efficient LED lights will reduce energy use and greenhouse gas emissions.

There are plenty of things you never know when you first become a homeowner, according to Lloyd Edge. Picture: Supplied
There are plenty of things you never know when you first become a homeowner, according to Lloyd Edge. Picture: Supplied

Think long-term about the equity

Depending on your long-term goals, you can use the equity in your current home for a deposit on another home.

If you're considering this, my top tip is to never cross collateralise loans - a situation where collateral for one loan is used as collateral for another loan, as it gives the bank too much control. You can also use the equity for renovations to add further value, pay for private school tuition for your children, overseas holidays etc.

The options are endless, and property truly does give you the chance of financial freedom and flexibility.

 

Originally published as Effect of huge bump in first-time buyers on housing


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