How to go from renter to home buyer

Rent vs buy: Why it’s worth owning a home

Renting may feel like a flexible and often necessary solution, offering more freedom to move around and avoiding the responsibilities of property maintenance. However, in the long-term, home buying could prove financially advantageous. We’re supporting you to go from renting to home buying by simplifying the process with manageable steps. Let’s start by looking at some of the advantages of buying a house.

Stability and freedom

Buying a home provides you with certainty because there's no risk that you'll be asked to move out if your landlord decided to sell or renovate. Tenants have little say in how long they can occupy a rental property beyond the lease term and it can be expensive to constantly move. Living in your own home also allows you the freedom to renovate and decorate your home as you please. Plus, a home is a valuable retirement asset, offering financial security if the home is paid off before retirement.

Rise in house prices over time

Having an asset that may increase in value over time is appealing. Historically, property values in Australia have risen, offering stable, long-term capital growth to owners. That said, they can also have periods of weak growth or even fall in value. You need to remember that home ownership is a long-term investment strategy.

Use equity in your home

Home equity is the proportion of your home that you own. Provided that the value of your house is increasing, as you pay off your loan, your equity will also increase. You may then be able to use the equity in a separate investment.

Next, let’s look at some of the key steps to help you confidently navigate the transition from renting to buying.

Step 1: Assess your financial readiness

You’ll need to understand your financial situation and long-term goals before you start looking at houses. Consider how much you have saved for a home deposit. Have you factored in other upfront and ongoing costs involved in buying or building a home, like moving expenses, insurance, maintenance, property taxes, landscaping, etc? You may also want to check your creditworthiness, as it will impact your ability to receive credit. 

Step 2: Find out how much you can afford

Understanding your budget will help you narrow down your home search. Calculate your debt-to-income ratio, which is typically your total monthly debt payments divided by your gross monthly income. You can also use the monthly repayment calculator to help estimate your monthly home loan repayments. Another thing worth keeping in mind are fluctuating interest rates. The idea of this exercise is to see if repayments will fit comfortably within your monthly budget, even if interest rates rise.

Take advantage of government grants

If this is your first time buying a home, it’s worth checking to see if you’re eligible for any government grants and stamp duty concessions. Grants tend to vary depending on the state you live in. Find which scheme or grant is suitable for you. 

Step 3: Secure financing

When you make the decision to stop renting and become a home owner, securing a home loan is key. You’ll want to start by exploring the types of home loans available (for example, fixed rate, variable rate), to find which loan type suits your needs. Once you know what will work, get a conditional approval to understand how much you can borrow. It’s best at this stage to shop around for the best mortgage rates and terms.

Step 4: Find your home

With a pre-approval handy, it’s easy to start the house hunting process. List your priorities by identifying the negotiables (nice-to-haves) and non-negotiables (must-haves) in a home. Also consider location, size of property and amenities. You could hire a real estate agent, as they can guide you through the process, provide access to relevant lists and help negotiate on your behalf. It’s also worth attending open houses and private showings, to get a sense of what’s available in your price range.

If you’re building, remember to check building specifications, builder inclusions and the orientation of your land block. 

Step 5: Make an offer

If you find a home you love, you can put in an offer (for a private sale). Review the home sales in the area to determine your offer price. And, make the offer, ‘subject to finance’ and ‘subject to building and pest inspection’. Engage a solicitor or conveyancer to help you handle all the legalities involved in the property transfer, including reviewing your contracts. There could be negotiations and possible counter offers, so be prepared. Once your offer is accepted, and the deposit paid – get a professional to conduct a building and pest inspection to identify any potential problems.

Step 6: Close the deal

You can expect to review and sign your loan documents after a formal approval. You should also conduct a final walk-through of your property to ensure that it’s still in the agreed-upon condition. On settlement day, your documents will be exchanged, a mortgage registered against your property title, and the balance purchase price paid to the seller.

Step 7: Move

Congratulations, you’ve officially transitioned from renting to home ownership. Here are a few final tips to ensure you enjoy a seamless move to your new home.

• Schedule your moving day and hire movers in advance.
• Transfer your utilities, internet, and other services to your new home.
• Notify the bank, post office and other important contacts of your new address.

Home ownership comes with responsibilities, but it also offers the stability and satisfaction of having a place to call your own. Doing research and talking to an expert is a good idea. To assist you with your decision speak with one of our specialists.