Remember, your first home is rarely your forever home and you will probably end up moving several times in your life. For this reason first home buyers need to think more like property investors, and remove the emotion out of buyinng as much as possible. A purchasing decision should be made based on whether you can comfortably afford repayments on the property, whether there is upside for capital gain and whether the location offers you a decent lifestyle for the short to medium term. Look at suburbs where you can make mortgage repayments with 30% or less of your household income. Over time, as you pay the loan down and capital growth kicks in, more and more equity will become yours to use for investments, renovations, or to upgrade later. Many young buyers feel pressure to get the perfect home the first time around and this can lead to heartbreak later. If you overstretch yourself and end up in financial stress, you could turn a dream home into a nightmare. Defaulting on a mortgage is not like defaulting on a credit card. There is a lot more heartache involved when you watch $600,000 worth of financial services and emotional investment get taken off you. The risk is not worth the emotional stress.

 The bank of mum and dad

If you need help from your parents to buy your first home, you are certainly not alone, especially with upfront purchasing costs so high and record low-interest rates making saving difficult. If you do go to the bank of mum and dad, it is important to do it the smart way. A common option for people is to have parents go guarantor on the loan, meaning your parents would be responsible for paying back the loan if you cannot. In the worst-case scenario, your parents’ own home could be repossessed by the bank if you are unable to make repayments. At the least, their own borrowing power will be affected by having your home loan as a liability. Banks like this option because all the risk is on you and your parents and if you are unable to make repayments, they have two assets they can draw upon to recoup the money they loaned for one asset. A smarter way is to have parents release the equity they have in their own home and either physically gift it to you or use it towards your deposit and set up a subsequent loan. That way, you owe your parents the money back and the bank only has access to your property.