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Unsurprisingly, one of the biggest hurdles for young people getting a mortgage is affordability. Melisa Sloan, founder of Madison Sloan Lawyers and author of Big Moments said that high demand and property shortages make things even tougher.
“The biggest hurdle is affordability and obtaining finance in an environment where property prices, particularly in city areas are relatively high. Saving for a deposit and the ability to service a mortgage has increasingly become difficult for young people over the past two years, with many now reliant on parental or other family help to obtain a mortgage and get into the property market,” said Sloan.
“Many people with good jobs and the ability to service a loan find themselves unable to obtain a mortgage because they do not have a sufficient deposit that is required by lenders. Additionally, property shortages continue to make it difficult for people for young people to get a mortgage.”
There are ways to make things easier, which firstly begins with being realistic. Punching above your weight and entering a loan agreement that isn’t manageable will only make the debt more suffocating.
“Always buy within your means, even if this means purchasing a property that is not in your ultimate desired suburb, or a house that is not as big as you would like. By doing so will allow you to live a comfortable life without the constant stress of how to pay your mortgage, particularly in an environment like where we have seen recently with interest rates, and subsequently mortgage payments have increased significantly over the past two years,” Sloan said.
“Financial stress has an awful impact on one’s health and should be avoided at all costs, so it is imperative that you sit down and work out what you can realistically afford to purchase and what you can realistically afford to pay in mortgage repayments, including making provision for interest rate rises.”
Going in with a strategy is equally important, as Sloan said: “Identify what is important to you and what sacrifices you are willing to make and what are your non negotiables, if holidays or entertainment is important to you, then these need to be incorporated when identifying your purchase and mortgage repayment budgets so that you are setting realistic budgets and goals.
“Assess your short term and long terms goals and invariably your mortgage goals will be incorporated into both of these providing you with clarity of what you are hoping to achieve in the short term as well as your long-term aspirations.”
Sloan outlined how beneficial it can be to talk to an expert. Young investors shouldn’t be afraid to lean on the expertise of people who have navigated these areas before.
“The best way to protect yourself is to obtain the appropriate advice from experts who will be able to guide you through the process so that you can make an informed decision about the whether the investment is the right one for you. Do your research and make sure you fully understand the investment, the history of the company or the vendor,” Sloan said.
“For example, if you are purchasing an off the plan apartment, research the builder and development company, look at other projects they have been involved in, are they credible, are there any evidential red flags? It’s important to also consider how you own the investment. If you are purchasing a property with another person, you may own the property as joint proprietors or tenants in common. This is important in determining what happens to the asset if you die – assets owned as joint proprietors automatically pass to the surviving proprietor whilst assets owned as tenants in common allow you decide who your equity in the asset passes to.
“Additionally, if you are in a relationship and want to make sure your investment is protected in the event of a relationship breakdown you may give consideration to putting a Binding Financial Agreement in place with your partner to protect your assets.”
[Related: Gen Z eyes property market: Bankwest]
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