Entering the property market can be daunting for people of any age, but if you’re a member of Generation Z, it can be especially confronting. Gen Z typically refers to those born between 1997 and 2012, meaning the oldest Gen Z’ers are just now heading into their late 20s, and staring down the prospect of owning a home.
However, it’s not all doom and gloom for Gen Z (and homebuyers in general). First homebuyer government initiatives can help make homeownership more achievable, and there are strategies young people can implement to help them own a home sooner. If you’re a Gen Z’er who doesn’t think they’ll ever own a home, it’s time to prove yourself wrong.
Step 1: Get your savings plan in place.
The key to homeownership is having the money to afford a deposit and mortgage repayments. A good rule of thumb to help with saving this money is the 50/30/20 Rule:
50% of your after-tax income is for necessities- rent, groceries, insurance etc.
30% is for your wants – day-to-day items such as indulgent purchases, entertainment, clothing, etc.
20% is for your financial goals, whether they be reducing debt, saving for a home, or building up an emergency fund
Step 2: Consolidate and pay off your existing debts.
Another financial hurdle Gen Z must contend with is student debt. Gen Z and Millennials make up 66% of those with HECS HELP loans, and while these loans are technically interest-free, they are still vulnerable to indexation, meaning that recent HECS HELP loans have ballooned due to 7.1% indexation. Debts such as student loans can negatively affect your borrowing capacity. If you’re looking to purchase your first home, paying off your student debt and any other debts you may have, such as car loans or credit card debts, should be near the top of your to-do list. This is likely to improve your credit score, making you a more attractive borrower to lenders.
Step 3: Get purchase-ready.
So, you’ve saved up enough for a deposit and you’re debt free, great! But a mortgage is a long-term commitment, and you need to make sure you’re in a strong financial position so that you can meet your repayments and cover any other long-term costs such as home maintenance and utility bills.
Plus, it’s worth remembering that whilst the interest rate you secure initially may be manageable, it may change with time. This is of course taken into account by the lender before they approve you for a loan and is a big part of their commitment to responsible lending, however it’s also helpful to have a mortgage broker on hand throughout the life of your loan in case your repayments increase slowly but surely, or your circumstances change. Your broker can assess your repricing and refinancing options and may be able to secure you a lower rate or a different loan that better meets your needs.
If you’re planning on bidding at auction, it is wise to secure pre-approval beforehand. Pre-approval provides you (and vendors) with an indication of how much you’re likely going to be able to borrow, it demonstrates to vendors that you’re serious about your intentions to purchase, and it can give you negotiating power and advantage over other potential buyers who have not yet secured financing.
Step 4: Seek help
At the end of the day, you’re still new to the homebuying process, and nobody expects you to know the ins and outs of the mortgage world. That’s where having a mortgage broker on your side comes into play. Mortgage brokers can present you with a wide range of loan options, walk you through the loan application process and do the heavy lifting for you, equip you with the knowledge and tools you need to make informed decisions and help you to secure a finance solution that’s right for your homeownership goals.
