Expert tips for home buyers taking advantage of the market

By Katherine O'Chee ·

Whether you’re an investor or an owner occupier looking to take out a home loan and purchase your first or next property, the skies are finally clearing up. 

The Aussie housing market is forecasted to see positive growth over the coming months, in light of game-changers like the Reserve Bank’s (RBA) interest rate cuts to a record-low 1% as well as the Australian Prudential Regulation Authority’s (APRA) decision to remove the minimum 7% interest rate floor and the 30% limit on interest-only loans.

According to predictions by Mozo’s property expert Steve Jovcevski, dwelling values in Sydney will rise by around 3% over the next six months from July to December 2019, while Melbourne’s housing market will gain its footing and recover a little as well. 

“The market has now reached close to the bottom since house prices started dropping in January 2019, and so, from now until the end of the year, we’ll see modest growth and possibly a modest increase in house prices in Sydney and Melbourne,” Jovcevski said. 

“There’s more confidence in the market,” he added. “Clearance rates - the percentage of properties sold at auctions per week or month - have already gone up, which may encourage vendors to get back into the market and start selling their properties.” 

RELATED ARTICLE: Find the right home loan for your investment property

For home buyers, things are also looking up. “If they’re buying a home, they’re buying an asset that’s appreciating at the moment - or going up in value rather than going down,” Jovcevski said.

This isn’t to say negatives for the market are completely off the table. Home lenders continue to scrutinise living expenses closely before lending homebuyers any mortgage money. 

But Jovcevski noted there has been moves to look into those negatives and redress them. Just this month, Westpac made a submission to the Australian Securities and Investment Commission (ASIC) calling for more flexibility when evaluating a borrower’s living expenses. 

And down the track, two more RBA cuts - one expected in November 2019 and another in February 2020 - could take place and further boost the housing market. 

However, Jovcevski warned people not to jump onto the homebuying bandwagon “for the sake of it”. 

“You still have to look at the fundamentals,” Jovcevski said. “Make sure the location is a good location. Make sure you’re comfortable with the repayments, even if the rates do increase.” 

But for those who are steadfast on buying that new house or property, here are Jovcevski’s top tips to prepare yourself before you go for a home loan

Property expert Steve Jovcevski’s top tips for first home buyers

1. Cut down on spending

With lenders now putting your living expenses under magnifying lenses, it’s a good idea to curb your spending at least 3 to 6 months before taking out a home loan, especially if you’re looking to refinance and get your hands on a better deal. 

Related: How much can I borrow on a $100,000 salary?

2. Save up as much as you can

Saving up more for your deposit could land you better home loan deals. If you have a 20% deposit, you will usually find it easier to negotiate down your interest rates with your lender. 

For first home buyers, the NSW government offers a First Home Owner Grant for those who qualify. From 1 January 2020, the federal government will also roll out a First Home Loan Deposit Scheme to help 10,000 people with a 5% deposit have a guarantee on the rest of the 15% so they can avoid mortgage insurance.

3. Pay off existing debt

Drowning in credit card debt that you’ve swept to one side? It’s time to revisit them before applying for a home loan.

If you’ve got multiple credit cards to handle, a debt consolidation loan will help combine all your debts into one easy-to-manage debt. But if you’ve just got one credit card to pay off and want sweet relief from high interest rates, a balance transfer could give you the breathing space you need, as most balance transfer offers have a 0% interest period. 

4. Limit your credit

Since 1 July, all banks can see the credit enquiries you have on your report. These enquiries can negatively affect your credit score and make taking out a home loan a hassle and a half, so limiting your credit and minimising your credit cards or personal loans can go a long way to helping you purchase the home of your dreams. 

You might not necessarily have debt on these cards, but just having a credit limit available to you can hurt your chances when borrowing. So if you’ve got credit cards you aren’t using, make sure to close them off. 

5. Do your research

Rather than approaching 10 different lenders and asking for their rates, it’s a smarter move to do your research first and stick to one or two lenders when applying. That way, you won’t wind up with multiple marks on your credit report, and you’ll look less like you’re fishing for credit wherever it’s available. 

Home loans - page last updated October 17, 2020

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Katherine O'Chee
Katherine O'Chee
Money writer

Katherine O’Chee is Mozo’s international money transfer and forex expert and business banking writer. She keeps Mozo’s readers on top of the latest news and writes in-depth features to inform and help Australians make smarter financial decisions. Her work has been published in major media outlets including Sydney Morning Herald, SBS News and Bangkok Post. She has a Bachelor of Arts (Media and Communications) from the University of Sydney.