Buy your first home or invest? Consider this…
As a first-time property buyer, it can be difficult to decide when and how to enter Australia’s competitive property market. These are two of the most accessible options:
- Buy your first owner-occupied home within your budget
- Invest and live with parents or rent
With housing affordability at record highs, the latter is becoming a popular choice among young homeowners who opt for building equity and maintaining lifestyle choices before they settle into their dream home. Others, especially first home buyers with young families, choose to buy, then invest later when they have enough equity. There are pros and cons for each choice.
Asking yourself the questions below may assist you while you make your decision.
Do you care where you live?
If you aren’t concerned about living over 1 hour away from the CBD, buying can be a good choice, there are affordable house and land options for first home buyers. This includes regional areas. Did you know Victorian first home buyers who choose buy a home up to $750,000 in regional Victoria are eligible for a $20,000 first home buyers grant? That’s double the normal amount!
If you like to maintain lifestyle choices like proximity to the CBD, nightlife, and shopping precincts, renting in a preferred location and investing in more affordable suburb may be a better option for you. You have the chance to build equity and later use that asset to buy or built in an area you would be comfortable living it.
Are you motivated by tax benefits?
For high-income earners with large amounts of tax, purchasing an investment property can bring substantial savings at year end. Many costs like legal fees, building insurance, home loan interest, property repairs and maintenance are tax deductible when buying an investment property, but not when you are buying a property to live in.
What is your borrowing power?
It can be difficult to borrow enough to buy your own home if you are on your own or have a low income. By purchasing a more affordable investment property and letting the tenant help you with repayments, you can at least get your foot on the property ladder.
Many young first home buyers will invest and stay with parents for a short period while they build equity, then buy their first home 12 – 24 months after. This can be a good strategy if first home buyers are initially unable to save a large enough deposit for the home they want to live in.
When affordability is an issue, first home buyers also have the option of using a family pledge loan. There are many benefits with this loan – you can often avoid having to save a deposit and avoid paying costly LMI. Ask us if this strategy can work for you or a child that is trying to buy their first home.
Our expert mortgage brokers at WhiteStar Finance can give you an indication of your borrowing power.
What’s more, our Property Investment team is also on hand to answer any questions you have about investing before you buy. Just call 1300 652 842, we’re here for you.