Building a property is serious business, and that means getting serious about your finances. Whether it’s your first home or not, going it alone or working as a team, it can be overwhelming figuring out where you’re at and where you need to be financially.
But don’t panic, we’ll walk you through a simple step-by-step financial health check so you can ask yourself: am I ready?
What are my assets?
Buying a home is about more than just saving for a deposit. First up, let’s figure out the health of your total assets. Add up the dollar value of each of these factors:
- What is your current income from work?
- What’s the total balance of your current bank accounts?
- How much do you have stashed away in savings?
- Do you own property and, if so, what’s its current market value?
- What would be the total value of your home contents, including furniture, if you sold them second hand?
- Do you have any other investments, like shares or a managed fund?
- What’s the total balance of your superannuation?
- Do you own a car? What’s its current value, taking depreciation into account?
What are my liabilities?
Great stuff, now you know you how much value you have locked up in your various assets, but that’s not the full financial picture. You have to weigh that number against any financial obligations you may have.
- Are you currently paying off a home loan and, if so, what is the outstanding balance?
- If you do own property, how much do you pay in body corporate fees/maintenance?
- How much do you owe on any credit cards?
- Do you have an overdraft?
- What about student or personal loans?
- Are you paying off a car loan?
- How much are you paying on insurance: car, home, life or other?
You can use ASIC’s Moneysmart site to help you add up your assets and subtract your liabilities, figuring out your net worth.
Check your credit
Even if your net worth is looking pretty healthy, it’s vitally important you double-check your credit rating. Something as seemingly innocuous as an overlooked utility bill from 10 years ago can trip you up when a bank assesses your suitability.
You can get a free copy of your credit report once a year. Find out how to apply here.
Check your contact details are correct and that all loans or debts listed are yours. The credit reporting agency may be able to fix minor mistakes, otherwise you should contact the creditor directly to dispute the listing.
If you are unhappy with their response, you can raise it with the Australian Financial Complaints Authority here.
Context is key
Once you’ve figured out your financial health and checked your credit, it’s worth doing a bit more homework to make sure you’re ready to build.
- Are you anticipating any changes in your personal circumstances that might affect your financial health rating in the near future? For instance, are you planning on starting a family and will that impact on your combined earnings/super?
- You also have to test the water on the financial snapshot nationwide. What is the current interest rate, and is that likely to rise or fall in the coming months?
- Is it an investment property, or are you buying to live? Do you plan on staying long-term or are you likely to sell up within 5-10 years?
- Are home prices rising or falling in your desired suburbs?
- Is this your first property and are you eligible for the First Home Owners Grant?
After you’ve scoped out your financial health and your personal home-owning goals, measuring that against the bigger picture nationally, you’ll have a much better idea whether you are ready to buy, or if you need a bit more time to work on your bottom line.
Whatever you decide, Metricon is here to help guide you. Get in touch with an enquiry here, and sign up for our newsletters here.
