As housing prices across Australia remain unsteady in the wake of COVID-19, potential homeowners are calculating whether it’s the right decision to break into the property market. To help make an informed decision, we asked Amanda Varidel, Managing Director of Heart Mortgage Services, to provide some insight into considerations that should be made before you decide to take the leap.
“The amount of activity in the property market has dropped off with COVID-19 – in some cases that may mean fewer properties to choose from,” Amanda explains. “But the quieter market is also an opportunity for homebuyers, particularly those who are essential workers or in jobs that have not been negatively affected by the pandemic and government restrictions.”
As Australians enter our first recession in 30 years, the decision to invest in a property now might seem at odds with the current economical climate, which appears to be reflected in Amanda’s line of work.
“The main concern we are seeing from borrowers is uncertainty about their jobs or the economy, and what the coming 12 months might bring,” she says.
However, as Amanda explains, those who are able to buy their first home might just benefit from doing it during these uncertain times.
“First homebuyers and those wanting to build a new home (or renovate an existing one) have been among the winners in recent months, benefitting from additional Government support,” Amanda states. “Meanwhile, essential workers with stable employment and property investors are seeing opportunities to buy at a time when the market is quiet and there is less competition.
“One of the big changes has been around qualifying for a loan. In a time where there’s more uncertainty about the economy and employment in some industries, many lenders have needed to put some additional checks in place to make sure borrowers can afford the ongoing commitment of a loan.”
Amanda goes on to list four other reasons why purchasing a property could work in our favour:
“The First Home Loan Deposit Scheme is a great option to help first-time buyers get into a home with a 5% deposit, while avoiding the cost of Lenders Mortgage Insurance.”
“Interest rates remain at very low levels. Rates as low as 2.18% are available at present. That’s a lot more affordable than the days your parents might remember when interest rates were up around 20% p.a.!”
“It could be a good opportunity to buy an investment property, if you are in a comfortable financial position, as there are currently fewer buyers and less competition.”
“Lastly, buying will give you the security of being in your own home. No more uncertainty about whether your landlord might hike the rent, or decide to sell up if they are facing their own COVID-19 challenges.”
The last point Amanda makes is validated by the influx of recent stories about the disconnect between landlords and tenants, as tenants struggle to come to an agreement or renegotiate their rent. So, if you do want to purchase a house, there are a few crucial factors to consider, one of which is your ability to save and how much you’ll reasonably need to have in your account to avoid paying far more in the future.
“The more you can save towards a deposit, the better off you will be,” Amanda reasons. “At a minimum, you’ll typically need 5% but having a good deposit to contribute to the purchase will save you money – it means you won’t have to borrow as much.
“In some cases, you might be able to secure a lower interest rate and you can save on Lenders’ Mortgage Insurance (LMI), which applies if your deposit is less than 20% of the property value,” she continues.
“The First Home Loan Deposit Scheme is a great Government initiative for first homebuyers, as it allows eligible applicants to borrow up to 95% of the purchase price without needing to pay for Lenders’ Mortgage Insurance – that could get you into your own home sooner.”
As a renter, the notion of saving for a home while simultaneously spending a large portion of your pay-check on monthly bills can seem overwhelming, so Amanda recommends seeking advice well in advance to know where you stand.
“My other advice would be to talk to us early – don’t wait until you are ready to buy a property,” she suggests. “We will be able to give you advice about your “borrowing power”, which is the amount you can afford to borrow.“That will give you a really good idea of how much you need to save towards the deposit. Work out how long it will take to reach the savings goal, based on what you can afford to save each week, and this will keep you motivated.”
Heart Mortgage Services can be contacted on 1300 861 143 from 9am to 9pm, 7 days a week.
Your Choice Mortgage Brokers Pty Ltd ATF Halo Innovation Trust trading as Heart Mortgage Services - Australian Credit Licence 38643
The information contained herein is of a general nature only and does not constitute advice. You should not act on any information without considering your personal needs, circumstances and objectives. We recommend you obtain professional financial advice specific to your circumstances. The views expressed here are not ours. While the information contained in this article may contain or be based on information obtained from sources believed to be reliable, it may not have been independently verified. Where information contained in this publication contains material provided directly by third parties it is given in good faith and has been derived from sources believed to be accurate at its issue date. To the maximum extent permitted by law: no guarantee, representation or warranty is given that any information or advice in this publication is complete, accurate, up to date or fit for any purpose; and no party or associated entities as mentioned is in any way liable to you (including for negligence) in respect of any reliance upon such information. This article may also contain links to websites operated by third parties who are not related to us. These links are provided for convenience only and do not represent any endorsement or approval by us.