First Home Buyers

Reporter: Mark Gibson

Mark Cribbon from West Coast Real Estate says not all house prices have come down.. first homebuyers need to be especially careful. "Affordability is an issue here at the moment, we've probably seen a little bit of a bubble at the lower end because the activity is so high, the competition's obviously high, there's less properties available so we're seeing the sort of 350 to 450 bracket probably enjoy the best period they've had for some time which of course increases prices so there is a pitfall there, you need to do your homework."

"In a matter of a couple of weeks we went from being really really busy to having nothing at all." Not that long ago, Sam Grafton was riding the boom.. the 22 year old electrician took out a 420 thousand dollar mortgage.. then, the economy went belly up and Sam lost his job. "I just didn't feel like it was going to get to us, well not as badly as other people were and then it really felt like maybe one week and we were going just flat out and then just stopped out of nowhere."

"You've got to know your product, you've got to know what it's going to cost you and once again watch that over-commitment." Mark Cribbon says your first home doesn't have to be a mansion."The units, the villas, the apartments in a 10 to 12 km radius of, obviously it's going to keep your transport costs down and obviously less maintenance as well." So you can enjoy the outdoors, you can get around without being stuck on the bigger blocks with lots of garden and extra maintenance to do."

Then, there's interest rates.. at 40 year lows now, but destined to rise again. Mark says "It's an area where you've got to understand that rates may increase and will increase over time so probably have a look at what you can afford at say 7 or 8% and feel comfortable with those repayments."

"I think it's caused a lot of first home buyers to perhaps move ahead and purchase property before they were actually ready to." Cameron Paul from Momentum Financial Planning says many first home buyers are being sucked in."I think they're being sucked in by incentives like the grant and low interest rates yes, I also think that they're perhaps spending more than they otherwise would have and getting into a property because they see it as their only chance to get that bonus now."

Sam Grafton says "I locked my interest rates in, that's how well I thought it was going and that, yeah, no good now."

So, what are our experts' top five tips to avoid financial disaster? Number one: Take your time.

Mark Cribbon says "Don't just buy because you feel there's a need to buy here now, prices may be a little over vauled at this stage so really, you need to do your homework."

Tip number two: don't borrow too much.

Cameron Paul says "If your gross income was say $60,000 look at a 30% of your gross income, so that would make it a $20,000 amount and that would be the maximum that you could put towards repayments on principal interest."

Thirdly: Job security - plan for the economy to get even worse.

Cameron Paul says "Unemployment is rising so if there's a a fear in their industry that they could be without a job perhaps holding off and even saving up more of a deposit could be a good idea."

The fourth tip: work out ALL your expenses, not just the price of the home.

"It's important when people are buying a first home to take into account all of the costs of that home so things like the settlement fees, any extra stamp duty you might have to pay over the half a million dollar mark, strata rates, land tax, insurance, all those things you've never had to pay before you're going to get bills for those things." Cameron Paul says.

And tip number five: give yourself a three month safety net.

"So look at all your expenses, your mortgage payments, your living expenses and have that sitting aside as an amount of cash for 3 months so if something does happen you could look after yourself for at least 3 months."

These days, Sam the Sparky is sub-contracting, praying the work doesn't dry up. "It's absolutely everything to me really because if I don't have that money coming in I'll lose my house definitely, I'll lose my car."