Renting Basics: Going from Renter to Owner

Before accruing all of the finances they need to make that leap into home ownership, the vast majority of Australian first home buyers would have spent time renting. While renting throughout your whole life makes sense for some of us, for others the final conclusion of being a tenant comes when we buy our own home. So how can you join the party, and transition from home renter to homeowner?

Transitioning from Renter to Owner

There’s a general progression that people on the real estate journey, one that most of us follow at some point in our lives. On the day we move out on our own, we are following generations of people before us, and while not everybody’s path is identical, there are nonetheless well-trodden sections to move through.

Despite the increasingly tough property market conditions, the great Australian dream of buying a first home is alive and well, with the proportion of housing finance commitments coming from first home buyers sitting at over 15% according the the Australian Bureau of Statistics (ABS).

Before accruing all of the finances they need to make that leap into home ownership, the vast majority of Australian first home buyers would have spent time renting. So how can you join the party, and transition from home renter to homeowner?

How Much Will it Cost?

It’s easy to read the frequent news reports about skyrocketing house prices and historic low housing affordability and be intimidated. However, should you know where to look, and how to temper your own expectations, finding affordable housing for purchase is not as difficult as you might think.

In fact, as reported in the Courier Mail in some 111 suburbs in the city of Brisbane, rent is actually higher than the ABS’ figures on weekly housing costs for people with a mortgage. The median $453 weekly spend for mortgagees equates to approximately 18 per cent of income spent on housing costs, while renters were finding themselves spending 20 per cent.

As you can see, perhaps breaking out of the cycle of renting is not as out-of-reach as you might think.

How Can you Get There?

One of the greatest hurdles to buying a home can be saving the required deposit. A recent home loans activity report found that for most couples, saving the approximate $100,000 for a home deposit will take on average 4.2 years nationwide. In some of the larger cities where property values are higher, however, that median stretches to as much as 7.9 years.

Having to grind out savings for up to eight years is, for many people, simply an unreasonable ask. There’s a silver lining though – you shouldn’t have to do it on your own. Each state and territory in Australia offers its own first home buyer incentives, including grants (up to $15,000 in Queensland) that can help you on your way to building your deposit. No-one is saying it’s easy, but thousands of Australians every year make the jump, and you can too.

From Tenant to Landlord

Perhaps you’re interested in real estate ownership as an income stream, as well as or in place of just owning a home for yourself to live in. Owning investment property is a great way to build your assets, so if you don’t necessarily want to move to the place you’re buying, that doesn’t mean you should disregard the opportunity to buy altogether.

Building up a property portfolio as an investment is one of the further branches that your real estate path could take, so keep in mind that your first home buyer benefits don’t have to be targeted towards a property you’re going to live in.

Buying your first home doesn’t always mean the end of your renting life, but for some people it’s the reward at the end of a long real estate journey, often through many rentals and landlords. Savoring that moment where you’re no longer paying someone else for their house is just the icing on the cake.

Easy ways to improve your bottom line

Investors are constantly looking for ways to build their wealth and accumulate more assets. Here are some very simple strategies that could help you save and make money to achieve your financial goals.

Prepare a personal family budget and pay attention to the details:

Pay attention to what and how you have been spending your hard-earned cash. Put your pen and paper at work to know where your income is coming from and what your weekly and monthly expenses are.

Get a discount on your current mortgage rate:

Get in touch with various banks and ask for a discount on your current mortgage rates. Arm yourself with what their competitors’ rates are, which could force your current lender to be more competitive. This could save you thousands of dollars in repayments.

Be inclined to good debt rather than drowning in the bad:

Focus your efforts on reducing the bad debt that is not deductible and make sure your Investment loans are interest only facilities.

Pay your mortgages on a weekly or fortnightly basis – after all, the banks calculate their interest daily: Get in touch with your bank and put in a request to pay the repayments on a more regular basis. This will allow you to save thousands in interest over a loan period. We buy houses in Ruston

Maximize your cash flow by using your credit card sensibly and managing credit terms:

For example, if your credit card cycle is the 20th, defer processing a payment to a creditor till the 21st, which could give you a minimum of 30 days interest free before you have to settle the credit card balance in full in the following month.

Create an offset account:

Any surplus funds are offset against your mortgage to reduce and save the interest.

If you have any shares and investment properties that are negatively geared, arrange a PAYG variation at the beginning of each year:

Use the extra cash gained from PAYG variation to pay off the home loan or add to your investment portfolio.

This is general information, please seek tax advice from a specialist accountant and or wealth planner before making investment decisions.