How To Purchase A Home Despite the High Cost of Living

It definitely costs more to live these days. The Australian Bureau of Statistics (ABS) has confirmed the Consumer Price Index (CPI) rose 1.9% in the December 2022 quarter, which took annual inflation to 7.8% — the highest level since March 1990. Research from UBS also revealed that food prices for two major supermarket chains, Coles and Woolworths, climbed to an average of 9.2% in the December quarter.

The cost of living has affected homebuying decisions for many Australians and increased repayments on mortgages have contributed to this financial pressure for some. Strained budgets have made it harder to save to purchase a property.

On the bright side, there are ways you can manage your finances so you can save to buy your home sooner.

---

How Can I Buy A Home When Costs Of Living Are Rising?

Define Your Financial Boundaries

Before looking for homes, figure out how much you can afford. This should be based on your financial situation and not the market. If your expenses are high, determine which ones you can cut back on and free up money for a mortgage payment.

Tip: Get pre-approved for a home loan to find out what you can afford. You can even try our repayment calculator to determine how much you would need to pay on your home loan each month.

Look For A Rate That Works For You

There are ways you can get a lower rate on your home loan. Some of them include maintaining a good credit score and having stable employment. If you need help with repayments on your credit card and other personal debt, you can consolidate them into your home loan.

For mortgage holders, don’t stay loyal to your current lender. You can refinance and choose a rate that works for you.

Do Not Use Buy Now, Pay Later Services

Buy now, pay later (BNPL) services can be enticing, but they can also encourage impulse buying — which is not great if your budget is stretched thin. These BNPL services can also affect your chances of getting approved for a mortgage.

Share Your Equity

Shared-equity schemes and arrangements are a great alternative if you can’t save a large deposit. Most of these schemes allow you to borrow with at least a 5% deposit.

Shared-equity schemes the federal state and territory governments have introduced help borrowers on low-to-middle incomes move into their homes sooner.

Take The Help Of The Government

There are incentives and grants that the federal and state governments provide to first-home buyers. Most of the states and territories offer grants and stamp duty concessions.

Determine Your Debt-To-Income (DTI) Ratio

Your debt-to-income ratio (DTI) is your total debts and liabilities divided by your gross income. Lenders use this ratio to determine how much you can afford to borrow. Keep your DTI as low as possible to increase your chances of getting approved for a home loan.

Look For Affordable Options

Look at different neighbourhoods and areas to find more affordable options. Consider alternative housing options, such as a fixer-upper or a smaller home that may be more within your budget.

Look For Ways To Increase Your Income

Take on a side job, ask for a raise or consider starting your own business to increase your income. Many lenders recognise that traditional 9-5 employment and traditional income verification methods may not apply to everyone, and it is still possible to obtain a home loan if you have non-traditional work arrangements.

---

We’re Here To Help!

Cost-of-living pressures can have a significant impact on homebuying decisions, but with the right strategies and planning, it is still possible to achieve the goal of homeownership. Our mortgage brokers are here to help. Call us on 1300 889 743 or enquire for free online today!