Making the transition from rent to mortgage

Just under a third of Australians rent their home while just over a third own their own property with a mortgage. If you’re about to transition from renting to home ownership – congratulations! But before you pop the bubbly, you need to make sure you’re ready to make the change. Here’s what you can expect.

GET READY FOR FORCED SAVINGS
One of the best things about paying a mortgage is that you’re forced to save. Your repayment will come out of your account every month and a portion will go toward paying your loan’s principal, in turn increasing your net worth. It’s just like being forced to save and at the end of it you have an amazing asset!

When all that money’s flowing out of your account, it can be tough to save more, but it’s worth it. If you repay your mortgage just a year or two faster, you could save tens of thousands of dollars (all of which can go toward much better stuff than interest, like reno’s and holidays).

EXPECT EXTRA COSTS
Buying and owning a house costs more than just the deposit and the mortgage repayments. Don’t forget about:

• Stamp duty: up to $20,000+ but may be free for some first home buyers.
• Conveyancing fees: roughly $500 to $2,200.
• Building inspection: $250 to $500+.
• Moving costs: $0 to $3,000 within Australia (more if it’s a big move interstate).
• Mortgage application fees: roughly $500.
• Council rates: from $1,500 to $3,000 a year.
• Home and contents insurance: $1,000 to $1,600.
• Home maintenance: Rule of thumb says 1% of property value, so $5,000/year in a $500,00 house.

When you’re a homeowner, it’s always best to keep a cash buffer in a savings account, just in case an unexpected cost comes up. That way you’ll never miss a mortgage repayment, no matter what happens.

GET ON THE TOOLS
If anything breaks, there’s no landlord to fix it – just you. And unless you live in a brand-new property, there’s a good chance you’ll have to do a little work to repair and maintain it – making now the perfect time to learn a few DIY skills.

Do some Googling and watch YouTube how-to videos (there are thousands to choose from) before you call in a tradie. Unless it’s a huge job or it’s electrical or plumbing work, there’s a good chance you’ll be able to do it yourself with a little practice.

ENJOY THE CERTAINTY AND LOOK TO THE FUTURE
The best thing about owning your own home is the stability. Provided you can make the mortgage repayments, you can stay in your new home for as long as you like. There’s no landlord doing inspections every three months or putting up the rent every year. You have your own space and your mortgage repayments won’t increase unless interest rates go up (and even so, you’re protected if you’re on a fixed rate loan).

This stability and certainty makes it easier to plan for your future. Whether you want to advance in your career, travel the world, have kids and start a family or just adopt a puppy and a couple house plants – it’s up to you because it’s YOUR house!