Tuesday , 1 / June / 2021
Buying a home is one of the most common dreams for many Australians, but the second time around you won’t go into the process with rose-tinted glasses. Instead, you’ll hopefully be armed with knowledge of the property market and a firm understanding of the financial implications of purchasing a second home to live.
Here’s what you may consider when thinking about buying a second home.
Get exactly what you want
In many cases, Aussies have to scrimp and save just to build up enough of a deposit to buy their first home, which isn’t always necessarily their ‘dream home’. Instead, it’s considered a starter property or at least a jumping-off point until we have enough funds to invest in the perfect home.
So when you’re ready to buy your second home to live in, it’s important to make a list of exactly what you want. Ask yourself:
- What are my top suburbs?
- How close is public transport?
- Can I design my own home in collaboration with professional home designers?
- Will the community be full of neighbourly residents?
- What’s my long-term plan for this second property?
- What will I do with my first property?
Buying in a master-planned community like Harmony means you can work with the land sales team, home builders and designers to customise your property. Not to mention you’ll be living in a brand new area that has all the best amenities at your disposal.
Decide what happens with your first property
Maybe your first home was just a starter property before you were able to build up enough of a deposit – and equity – to buy the home you’ve always dreamed about. In this case, you could simply sell your first property and move into your next home.
However, in some cases you may want to retain your first property. You don’t need to be a property mogul to own more than one home. Instead, it could supplement your income and even cover the costs of your original mortgage – if the rent price is right.
What about my equity?
So what happens if you don’t have enough to cover a deposit for your second home – are you out of options? Not necessarily. It’s recommended that you have at least 50% equity in your existing property. You’ll also want to ensure you’ve had a clean repayment history over the life of your mortgage so far, you’re currently employed and you have a good credit history. You can check your credit score for free with a number of different companies.
How are your finances – and do you have a backup plan?
What’s your cash flow like at the moment – are you earning enough to cover the cost of your current home’s repayments easily? If not, it’s important to consider whether your next home will cost more or less than your current mortgage. If you’re planning to upsize, for example, your monthly repayments will likely be more expensive, while downsizers may enjoy a lower mortgage.
Whether or not you intend to keep your first home as an investment property, or sell it to fund the purchase of your second home to live in, Westpac recommends that you have a backup plan. How would your finances be affected if you suddenly lost your job, for example? Maybe creating a separate account and topping it up with emergency funds will help cover any additional expenses – including bigger mortgage repayments on your second home.
Which loan type is best?
Deciding on which home loan provider is best for you is entirely personal and should be based on your particular circumstances and financial goals. However, it’s wise to think about whether a variable or fixed rate is the best choice for your second home to live in:
- Variable rate: These loans fluctuate with what’s happening in the market. For example, in 2019 interest rates have been slashed several times by the RBA, which means variable rates are low – and lower interest rates means lower mortgage repayments. However, if the market trends upwards then your monthly repayments will rise as well.
- Fixed rate: If you want to protect yourself against big interest-rate movements, a fixed rate may suit you better. With a fixed-rate loan you are ‘locked in’ to a set interest rate for an agreed-upon number of years (decided with your provider). While this means your monthly repayments will remain the same for that period of time, if you want to pay off more than the standard amount – or move to a variable rate or refinance your home loan during the fixed period – then you may have to pay a sizable ‘break fee’.
Buying a second home is a really exciting time, and the type of house you dream of owning will be unique to you. That’s why it’s important to look at all your options and make sure they are meeting your specific needs. Once you check off everything you want, you’ll be well on your way to owning your dream second home!
Central to everything the Sunshine Coast has to offer, Harmony perfectly encapsulates the desirable coastal lifestyle. Boasting a unique casual culture that is also genuine and welcoming, living at Harmony means you are part of a connected community.