When you are buying a family home you are no longer just thinking about your own needs – or the needs of your partner – but also a whole hoard of little people, and probably a pet or two as well. Therefore, to help you make sure you are considering the needs of every member of your family when buying a new family home, and that you are able to make the move securely and successfully, follow these 10 steps:
- Research and plan your needs for your home and your home loan.
- Save for a home loan deposit, around 10-20 per cent of the property price.
- Arrange finance including loan pre-approval.
- Start looking for your new family home.
- Narrow down the market to one ideal property, but don’t get too excited just yet.
- Have the necessary building inspections done to inspect the condition of the property.
- Complete the formal loan application and obtain full approval.
- Complete all legal checks and requirements.
- Exchange contracts with the seller and pay your deposit.
- Once settlement is finalised you and your family can move in.
To help you with the five main stages of these steps, consider the following information and advice when buying a family home.
1 – What to buy for your family
If you are buying a new family home it is because your old home no longer suits your needs. Therefore, think about all the things you need and want from your new home. For example, do you need a yard for your children and dog to play in, and do you want an outdoor entertaining area so you can have BBQs at home with your family and friends? Also consider whether there are parks and footpaths around your new house if you like to take your family for walks around the neighbourhood, or if your children will want to ride their bikes.
Of course, your new family home doesn’t have to be a house at all, in many major cities families live in small properties such as apartments, townhouses or studios. This is not only more affordable, but can also mean you’re living in a newer home, closer to the city.
However, no matter what type of home you are looking at, make sure that the area and community suit your lifestyle and that you have access to the facilities you need such as schools, transport, shops, recreational facilities and your workplaces.
2 – Where to buy a family home
Whether you buy a new family home in the city, the country or the suburbs will depend on your family’s needs. For example, if it is important that you have a short commute to work you may look for a family home close to the city, but if you want your children to grow up with a country lifestyle and outlook you may look even further from the city, whereas the suburbs are a compromise for families who want to be away from the bustle of the city and enjoy some space, without being too isolated.
Also remember that where you live can affect where your children go to school, as many schools are zoned, and don’t accept students from outside of the zoned area.
It is also important to look at the value of the area and consider whether property prices are rising or falling in the area. Also look at factors which would influence your property’s value such as the proximity to jails, factories, sewerage plants or major construction. Remember that being on a busy road or intersection, or under a flight path can make normal family life even noisier.
3 – When to buy
The property market always has its ups and downs and if you are considering a move for your family, the best time can be:
When interest rates begin to fall after a peak period as house prices are going to rise soon after as more buyers enter the market so you want to get in before that happens.
When house prices are low in a depressed market.
When inflation is rising because house prices are likely to increase faster as inflation gathers speed.
At any time it is possible to find a bargain on a family home by looking for homes which have been passed in at auction. This means that the bidding didn’t meet the reserve price the vendor was asking for, and if there is little interest in the property, the vendor may be willing to accept a lower price.
4 – Your budget
As much as you and your family may want two extra bedrooms and a bigger backyard, you need to buy your family home based on what you can afford, balanced with what you want and need. It can be tempting to stretch yourself financially to be able to buy a family home you fall in love with, but this is actually putting your family at more risk as you may struggle to repay your home loan in the future and risk defaulting, or not being able to pay your other bills.
To work out what you can afford, remember that when you buy a new home you will need around 5% of the purchase price to cover the legal and government charges, the loan establishment fees and mortgage insurance. You may need even more than this as stamp duty is calculated as a percentage of the total purchase price. These are all costs you will need to save up to pay for, on top of saving for a deposit.
Most home loans will require a deposit which is 10% of the purchase price. While some lenders may let you put down just a 5% deposit, the more you can put down, the lower your mortgage repayments will be, the less you will pay in mortgage insurance premiums and you may be able to afford to buy a better family home. Mortgage insurance protects the lender if you default on your home loan, and is charged based on the level of risk you represent to the lender. Therefore, if you provide a higher deposit amount you represent a lower risk.
When you are buying a family home you want to make sure your family can feel safe and secure in their new home, so you should also budget for income protection insurance. If something happens to you and you are unable to make your mortgage repayments, income protection insurance can pay your bills to protect your financial security.
As you start looking for a new family home, allow enough time for your budget to catch up, remembering that it takes most people between two and five years to save the necessary deposit, and another three months to find the right lender.
5 – Borrowing to buy your family home
There are hundreds of different loans to choose from to help you finance the purchase of your new family home and since your home loan will be one of the biggest expenses in your monthly budget, you want to make sure you have the most affordable loan product. The most affordable loan product is the one which suits your needs and finances, as it will help you to repay your loan sooner, as well as save you money on any features you’re not going to use.
The main loan types you can choose from when buying a family home include:
- Standard variable loan. This means your interest rate changes as the lender adjusts their rates in line with official interest rates. As a result your monthly repayments can fluctuate, but you will be able to take advantage of falling rates.
- Line of credit. This is a revolving loan account which allows you to use the equity you have in your home as security to draw down on that amount as you need it, only paying interest on the amount you have used.
- Interest only. None of your principal loan amount is repaid over an interest only term, and you make just lower interest repayments.
- Bridging loan. Can help you buy a new family home before you have sold your old home and you can often have your interest and repayments capitalised so you are only repaying one mortgage until your old house sells.
- Construction loan. Lets you draw down on your loan amount at strategic times during the building process to pay for the construction of your family home, and you make interest only repayments until your house is finished.
To help you decide which of these home loans is right for your family, consider:
- Whether you want the flexibility to make additional repayments.
- If you would prefer fixed monthly loan repayments.
- If you need a redraw facility to access additional repayments.
- If you want to be able to pause repayments while your family is young and you are working less.
- Whether you will be making weekly, fortnightly or monthly repayments.
- The size of your deposit and whether you will need to pay mortgage insurance.
- Whether you can use your existing family home as security for a home equity loan.
Alban has contributed to several personal finance blogs. When he is not sharing his thoughts, Alban is a writer at Personal Loan Finder