At the start of 2020, we all thought a Corona was something that came with a wedge of a lime and went alright on a hot day. Six months on, the virus of the same name has upended life as we know it and affected pretty much every aspect of our day-to-day routines. In the second of this three-part series, we share our tips for applying for a home loan in these new COVID times.
If you had “Buy a house” on your list of New Year’s Resolutions for 2020, we’re guessing it wasn’t closely followed by “Experience a once-in-a-lifetime pandemic”. The fact is, at the start of the year no one could have predicted COVID-19 or the havoc it would wreak on our lives – especially for those who had big plans for 2020, like getting married, taking an overseas holiday or buying their first home.
Like many other homeowning hopefuls, your purchasing plans have probably been on ice over the last few months, but now you’re beginning to wonder whether it’s safe to go back in the property paddling pool. The short but infuriating answer? Yes and no.
Everyone was affected by the pandemic differently, so there’s no ‘one size fits all’ solution. For instance, some people have been able to use this time to knuckle down on their household budget and are saving more than ever before without the temptation of the local pub or smashed avo brunches. For others, the lockdown and social distancing restrictions wiped out their income overnight, so the last few months have been pretty bloody tough.
If you’re ready to get back on the house-hunting horse, a good mortgage broker will be able to help you figure out where you stand and what the best course of action is for your individual circumstances. Here are four other pointers to keep in mind.
Don’t get caught up in the media hype
The housing market will crash. The housing market will rise. There’s never been a worse time to buy. There’s never been a better time to buy.
The only thing that’s been speculated about more than a COVID-19 vaccine over the last few months? The Australian property market, and everyone from world-renowned economists to your nan has their own opinion on how it’s been affected by the pandemic. The fact is, no one really knows – and may not for a while – so it’s important not to get caught up in the hype or let it influence your decision making.
Buying your first home is one of the biggest purchases you’ll make in your life, so you need to make sure your research is watertight. Even if you’ve found an online article or report from a reputable, trustworthy source, check when it was published – things have changed so quickly during the pandemic that even advice published as recently as March or April could be as out of date as that milk at the back of your fridge.
It might feel like the pandemic has dragged on forever, but it’s really only been a few months. At the end of the day, you don’t want to let someone’s hot take on a very temporary situation influence a decision you’ll be living with for the next few decades.
Crunch your numbers – again
As we mentioned above, no two people have experienced the pandemic in the same way. Your pre-corona self and your post-corona self might be identical – or could look as different as 2007 Britney and present-day Britney. If you’re in the latter camp, it might be time to revisit those colour-coded spreadsheets to ensure your numbers still stack up before you start approaching lenders for a home loan.
For example, if your income has been affected by coronavirus, your lender will need to know – they don’t care if you could have serviced your mortgage three times over back in March, they want to know if you can service it now. Lenders are still keen for new customers but are taking extra precautions in their approvals. They’ve been hit hard by the virus too, so now’s not the time to try and fudge your numbers.
However, if you’ve been able to use the lockdown period to get your financial affairs in order, cut your expenses and hoard a few extra dollars under your mattress, let them know about that too. Hey, the pandemic has completely stifled your social life and put an end to all your favourite activities, so some good has to come of it, right?
Make the most of the new government grants and stimulus packages
Sco Mo and Co have gone HARD with stimulus packages to protect the economy from the effects of coronavirus. He might not quite be screaming “You get a car! You get a car!” a la Oprah, but there are still some goodies to be snapped up if you know where to look.
First home buyers should be keeping their eye on the new ‘Home Builder’ grants that were announced by the Federal Government earlier this month. While some restrictions apply, you may be able to secure a lump sum of $25,000 that can be put towards a new build or renovations on an existing home. The former could be helpful if you’re considering one of the new land estates in Western Sydney, while the latter might help sway you on that fixer-upper you were about to chuck in the ‘too hard’ basket – that pink bathtub and ‘70s wallpaper isn’t so bad when you’ve got some extra cash to get rid of it.
The ins and outs of these schemes are still being finalised, but follow developments to see how you might be able to make them work for you. That’s what they’re there for, after all!
Do your research (and have a chat to your mortgage broker)
With the market changing so rapidly as a result of the pandemic, it’s never been more important to do your research and make sure you’re shopping around for the right option for you. There are plenty of opportunities out there but also some potential pitfalls, so this is where your mortgage broker is worth their weight in gold (or exposed brick – whatever floats your boat). They’ve been keeping their eye on the market throughout all this craziness and will be able to provide an expert opinion on your specific circumstances.
After all, the COVID-19 pandemic might have completely derailed the last few months, but this is just the beginning of a home-owning journey that will last for decades – so you want to ensure you are making decisions that will work for Future You as much as they do for Present You.
Check out Part Three of our ‘Life After Lockdown’ series for everything you need to know about interest rates and how they’ve been impacted by the COVID-19 crisis.
The material on this website is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances, and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based on the information in this publication.