My enigmatic co-host (on The Australian Finance Podcast) Owen Raszkiewicz has really gone and done it this time, buying a house of all things (and during COVID-19 no less)! Obviously being personal finance geeks, we had to deep dive into the whole situation on an episode of the show. I wasn’t going to let him go easy after this, so we discussed what exactly was going through his mind during the process, some of the places he went for advice and what went wrong.
I’d highly recommend tuning into the episode on your favourite podcast player, and I’ve pulled out some of the interesting highlights below.
Making the Decision to Start Looking For a House
For Owen, buying a property was a lifestyle decision more than anything. Although he made sure to search for an investment-grade property that he can rent if needed, the focus was more on his current family priorities.
It’s important to be really clear when looking to buy a home, on what your personal priorities are and the reason you’re buying it. If it’s only because you’ve been told it’s something you need to tick off the “adult” list, you’re trying to impress your friends or family or because you believe it’s a risk-free way to invest, you should pause to consider if making such a massive long-term commitment is suitable for you.
I don’t hate property but I think the Australian dream is not all it’s cracked up to be. This is simply because I don’t think housing itself adds that much value to your wallet and society. It’s really the land that increases in value, not the bricks and mortar itself. You’ve also got a lot of costs involved with buying and selling the property, along with costs to manage it, it’s an investment property.
You use a lot of debt to finance a property purchase and the risks of that have been hidden for a long time, due to falling interest rates. I want people to be realistic about this, a lot of people are scared about putting $2,000 in shares but are happy to get a $500,000 mortgage. It’s not all one or the other, you can invest in both property and shares.
Saving Up For a House Deposit
One of the more challenging issues is realigning your first home reality with your expectations. Unfortunately, most of us will not be in a position to buy our dream home initially and it may not be something we can achieve until later in our life. For Owen, that involved moving back home with his wife’s parents and supercharging their savings over the last six months.
Thankfully, the COVID-19 lockdown was actually helpful in keeping his costs and spending down, while saving up for the almighty house deposit. It’s a good idea to think of your first home as a stepping stone, rather than the end result.
Consider if what you want is feasible or if you’re able to compromise by choosing a smaller property, moving out of the city, rentvesting etc.
We were able to save rapidly by moving back in with the inlaws, which was a sacrifice we were willing to make. We were very fortunate that COVID-19 meant we had nothing else to spend money on, which we were able to use to our advantage while shoring up our deposit.
Learning About the House Buying Process
Thankfully for Owen, he already had a background in finance and had been able to pick up a few bits and pieces on the property buying process along the journey. He did, however, regret that he didn’t seek the help of a qualified mortgage broker earlier in the process. For loan applicants that don’t fit the cookie-cutter approach like Owen, it can be more difficult to get a loan approved.
I thought I didn’t need anyone, but it turned out we did need the guidance of an expert mortgage broker. My financial situation is atypical and about as cloudy as you can get. When I think about it, having a good mortgage broker and speaking to them in advance is absolutely worth it.
You need to plan this months in advance as it does take some time, especially now. I underestimated how important these experts can be.
If you haven’t tuned into the episode yet, it’s available over here on The Australian Finance Podcast.
Resources
- AFP Episodes: Ep. 66. Property Investing 101, with Amy Lunardi, Ep. 54. Is Now The Best Time to Buy a House?, Ep 56. Property prices to fall 30%? Maybe… but maybe not
- Buying a house – Moneysmart.gov.au
- Video: Difference Between Property & Shares in Australia | Rask Education
- Rask’s A-to-Z of Financial Independence: The Complete Guide
- Inside Real Estate: Buy, Sell and Profit in any Property Market
- First home buyer guide
- The Buyers Bible Podcast
- How to be a property buyer during covid – market timing
- Lenders Mortgage Insurance (LMI) explained
- MoneySmart – Home loans
- First time home buyers: The ultimate guide to buying your first home
- Vic Gov: First home buyer guide
- First Home Loan Deposit Scheme
- How to save for a house deposit
- What is rentvesting?
- Mortgage calculator
