Renting when you plan to buy
When it comes to property, one of the biggest challenges for most people is taking that initial step onto the home ownership ladder. After all, while you save to buy a property, chances are you are also spending on rent.
Believe it or not, managing your finances while renting and trying to save is not quite as hard as it sounds if you plan carefully and consider a few extra factors. Here’s our guide to renting when you plan to buy.
Budget, budget, budget
It doesn’t matter if you’re renting or saving while still living at home, budget is everything when it comes to putting money aside for a deposit and also illustrating to the bank that you have the ability to save.
If you are renting with a view to buying in the near future, now’s the time to consider trimming down on your rental property requirements.
You might forgo that pool, that extra bedroom or that expansive backyard in your rental in a bid to save extra cash that enables you to set money aside for a deposit.
Now might also be time to share the rental burden, calling on friends to be your flatmates and contribute to the rental cost.
Don’t forget every person who resides in a house should be on the rental lease.
Your rental record can help you
Often people fail to appreciate that a good rental record can work in your favour.
For example, if you can demonstrate to a lender that you pay your rent on time every time, the bank will consider this as an indicator you can meet financial obligations, and also note that this expense will not be required in the case of an owner/occupied mortgage.
There’s a couple of caveats here. This history must indicate regular rental payments for a minimum of three months. Some lenders want six months, and others require a 12-month history and the lease must be in the same name as the borrowers applying for the loan. If two people are looking to enter a loan together, then both people must be on that lease.
Investigate grants and options
If you’re a first home buyer, the state and federal governments have a raft of initiatives to help you get into the property market. These include first home buyer grants for new properties and the First Home Buyers Deposit Scheme introduced this year.
Each of these come with conditions and the grants vary from state to state, but they’re certainly worth investigating.
The federal and state governments are very much in favour of encouraging the construction of new accommodation. That’s why grants tend to apply to new housing.
Also, construction loans work differently to general mortgages and are potentially easier to obtain and manage while renting.
If your personal financial circumstances allow, this could be a highly effective way of getting into your own home.
What about rentvesting?
Another strategy that’s proving popular is something called rentvesting. This sees people rent in the area where they live and purchase in the area where they can afford.
Rentvesting is often more financially manageable than saving for a massive deposit in prime real estate areas like Sydney and Melbourne, but it still enables you to get into the property market.
The downside is rentvesting properties generally do not attract first home buyer grants.
Tough but worth it
Saving for a home while renting can be tough, but it is worth it. With a bit of strategy, some small sacrifices and your focus set firmly on the goal, it is feasible to save while renting and take the first step towards your property dreams.
How we can help
If you’re ready to step into the property market, our Eview agents can assist. Our experienced Eview agents are here to assist with local knowledge, market insight and professional advice to help guide you through the decision making process, and assist with any sale.