Making the jump from renting to owning your home can be a daunting experience, but one thing that you can rest assured knowing is that it is possible. Getting your finances in order is the first step to get approved for a home loan that will help you get a foot on the property ladder. Having these three tips can help you break the rent cycle into the property ladder.
1. Financial decisions you make today can affect tomorrow
It is the small things that will count when it comes to being financially fit to flex your credibility when applying for a home loan. It will also determine how much you will be able to afford. Therefore, it is vital that you start assessing the way you use your finances to pay off your everyday expenses, loans, and bills.
Having a budget that will help you track your expenses can also benefit you when it comes to saving a 20% for your mortgage. An emergency fund is one of the signs that you are ready to break into the property market. If you have a bad credit score or are currently struggling to stay atop of your bills you might want to put buying a house off until you are financially stable.
2. It is hard to crack the property market, but it’s possible
Things have certainly changed when it comes to home ownership in Australia. Australians are now postponing purchasing a house when compared to 30 years ago. Grattan Institute think tank found that the housing affordability has changed from the 1980’s where 60% of people aged 25 to 34-year olds owned a home. This number has dropped to less than 50%.
Unless if you are part of the 20% of Australians that are able to get that needed push from the bank of mom and dad, you will need to strengthen your financial records to get approved for a low rate home loan. Checking your credit report can help you see if there are arrears or errors that you need to fix to improve your chances of accessing a loan.
3. Stick to what is within your financial reach
Having a house in one of Australia’s lux suburbs close to the city or on the sun-kissed coast might be the dream, but if you are just cracking the property market you might want to consider sticking to what will be within your financial reach.
Figures released by the ABS showed that there is a proportion of renters that are currently under financial stress due to having a rent that takes a huge chunk out of their salary. According to the data, renters that spent an equivalent of 30%-35% had their rent jump to nearly 50% in the past decade.
The general rule of thumb is that your rent should not exceed 30% of your income. If it is, then it’s time you considered moving to an affordable place. Always keep in mind not to buy too much home that could end up pushing you into a debt spiral.