Purchasing a property can appear daunting but the journey from finding finance to moving in is easier than it seems. One of the main considerations for anyone purchasing property, whether it is your first house or your dream home, is the choice between buying or building. While both alternatives have their benefits and advantages, the first step when looking to purchase is to ensure you have the right type of loan to suit your financial situation.
While there are many loans and finance providers in the market, the main options that you need to consider are principal and interest or interest only loans, and variable versus fixed interest rates.
Variable interest rates are generally lower than fixed but do fluctuate, so you while you may benefit from low interest rates they can also increase making budgeting harder. Variable loans generally provide redraw facilities and allow voluntary payments to help you pay your loan off faster.
Fixed rates mean you know your repayments will be over your loan period, making budgeting easier. Most fixed loans however only allow limited extra repayments, don't have redraw facilities and may charge fees if you pay the loan out early. Some financial providers will allow you to split your loan between the two types giving you the best of both worlds.
Once you have your rates sorted you need to look at the type of loan that would suit your situation. The most popular is a principal and interest home loan where you pay off the principal loan amount and interest repayments together. These repayments are slightly higher but allow you to pay your loan off quicker.
An interest only home loan only requires you to make payments on the interest of the loan, and not the principal amount, for a set period of time. Interest only loans normally have a maximum period of five years, after which the loan reverts to principal and interest repayments, but provide you with lower initial repayments.
If you need advice about what financial options would be suitable then you should consider using a broker as they have access to a wide variety of lenders and can find a loan to suit your financial situation. Getting pre-approval before looking at properties is important as it informs you how much you are able to borrow and once you have your finances in order you can begin your search.
Building your own home can be the best way to get exactly what you want and options range from buying off the plan to having your home architecturally designed. Once land has been purchased the average home takes between four to nine months to build, depending on your design.
When building there a wide range of decisions and costs involved. Apart from choosing your design and location, you need to ensure you understand all contracts and are aware of costs associated with building. These can include site preparation, variations to designs and extra features not normally included such as additional rooms, more expensive materials and possible delays.
Purchasing an existing home can offer a much simpler solution, especially for first home buyers looking to break into the market. Costs are usually comparatively lower, the purchase process can be simpler and most properties are ready to inhabit straight away.
Remember to consider your current and future needs and inspect as many homes as possible to ensure you are happy with all aspects including size, layout and proximity to services such as transport, schools and shopping centres.
It can be hard to recall individual homes so be prepared to take photos and notes during inspections, and compare your favourites. Remember you can always renovate and make changes to your home giving it your own personal touch and adjust as your needs vary.