Getting Ready for Home Ownership

Deciding whether, and when, to get into home ownership can be a daunting and confusing process. There are benefits, risks and responsibilities that flow from buying your own home, and it really depends on whether the time is right for you personally and financially.

It is your responsibility to ensure you can afford a home loan while considering your other financial obligations and future plans. However it’s equally important to consider your plans for the future. Having children, career changes, retirement and other lifestyle factors may affect your ability to repay a loan.

Some of the benefits of home ownership
Some of the risks and responsibilities of home ownership
To rent or to buy
What shape are your finances in?
Managing your finances
Tips for saving money
Useful links

Please note: The information in these resources has been prepared as a general guide, without knowledge of your specific situation. You should consider how appropriate the information is to your own financial situation and needs, and seek your own legal advice before making financial decisions.

Some of the benefits of home ownership

These include:

• You’ll have a place that is yours.
• You’ll have a place where you can raise your children and become a permanent part of your local community.
• You’ll be creating a source of security and financial independence for yourself and your family.
• You are able to pass your home on to your children.
• You may pay less to own a home than you would to rent – and it’s yours at the end.
• If your home needs repairs or maintenance, you don’t have to wait for a landlord to give permission or complete the repairs.

Some of the risks and responsibilities of home ownership

These include:

• Your monthly mortgage payments may be larger than your rent, giving you less income to spend on other living costs.
• You are responsible for the maintenance and upkeep of your home and your property, and the cost of any repairs.
• You will be responsible for insuring your home.
• You may need to sell your home if you experience unforeseen situations such as illness, injury or other events that prevent you from making repayments.
• The value of your home might decrease due to a number of reasons.
• If interest rates increase you might need to make higher loan repayments.

To rent or to buy?

In weighing up the pros and cons of renting versus buying, it can be useful to research how much it would cost to buy a property similar to the one you’re currently renting. How much would you need to borrow, what would your repayments be, and how does that compare to your current rent?

The table below covers some of the other issues you might consider in weighing up the pros and cons of renting vs buying:

What shape are your finances in?

Some of the questions lenders will ask when assessing your financial circumstances include:

Capacity: Can you afford to repay a loan? Do you have a steady, reliable source of income and a steady employment history? What are your living expenses, and are you currently able to live within your weekly/fortnightly income?

Character – Are you a good financial risk? Do you have other existing debts (e.g. credit cards, loans)? What is your credit history – do you have a good history of repaying and managing those debts?

Collateral – Does the property you are buying provide enough security against the money you would be borrowing?

Capital – What other assets do you already own?

Your personal credit history will be assessed. If you wish to know what information about you is held by the credit reference agency, you are entitled to obtain a copy which can be requested by visiting Veda Advantage (external website, new window).

Managing your finances

Budgeting is a great way to understand your income and expenditure, and learning how and where you spend your money can be a first step to managing your finances and saving for home ownership.

1. Identify your net monthly income. How much money comes into your household each month before you pay any bills? This determines how much you money you are able to spend each month.

2. Work out your monthly expenses. What do you spend money on each month? The Australian Securities and Investments Commission provide a useful FIDO Budget Planner (external website, new window) which identifies everyday costs including rent, groceries, insurance, medicines, haircuts and takeaways etc.

3. Compare your income to your expenses. When you subtract your expenses from your income, what is left? This may tell you that you need to spend less money, or that you need to make more money, or both.

4. Don’t forget about savings. While saving can seem difficult, you may be surprised by how much you can put aside from your income once you have a budget in place, and how quickly that amount can grow.

Tips for saving

These include:

• Develop a spending plan. Make sure that it is realistic so you can stick with it over time.
• Look for easy ways to trim expenses, such as taking your lunch to work, cutting back on daily expenses such as buying coffee, snacks, or bring these items from home instead of buying them at work.
• Pay your bills on time to avoid costly interest charges and late fees.
• Wait 24 hours before making a major purchase; it will help avoid impulse buying.
• Pay your credit card balance off each month, and look for competitive credit card interest rates.
• Don’t make too many cash withdrawals from a credit card as charges may be higher for these transactions.
• Make money management a family affair; involve your partner/spouse and your children.
• Don’t give up. Sticking to a spending plan may not be easy at first but it will get easier.

Useful links

Visit our Useful Links section for a list of other websites and organisations who can provide home ownership advice, resources and assistance.