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4 things you can do when you can’t afford your dream home

It's a common scenario: You spend what feels like decades saving up money for a home in your dream suburb, only for the answer to your question "how much can I borrow", to be "not enough".

The surging property market has meant that many home buyers have found their nest eggs aren't quite big enough. According to CoreLogic RP Data, 20 years ago more than 95 per cent of homes for sale in our capital cities sold for less than $400,000. Fast forward to June 2015, and in Brisbane that number has shrunk to just 30.4 per cent.

The important thing to remember is to not be disheartened! Here are a few suggestions on what to do when homes in your preferred suburb are just out of your reach.

Purchasing your first home can be an exciting experience.Purchasing your first home can be an exciting experience.

1. Look at neighbouring suburbs 

Have you had a look at the areas surrounding your ideal area? Often widening your search to nearby areas can dig up gold, as they can offer similar benefits only with a smaller price tag.

In fact, the Australian Securities and Investments Commissions (ASIC) recommends looking for suburbs that are much cheaper than their neighbours, as this can indicate imminent growth in the future.

2. Go smaller

Take a seat and have a ponder: what's more important to you, the location or the home? ASIC asserts that if it is the area that wins out, you should start small and work your way up.

While it might be nice to have an extra bathroom, spare bedroom or a nice deck, do you really need them?

If you can compromise on the size, it will almost always be easier on your wallet, which means your home loan will likely be sufficient for your dream suburb! Consider using a borrowing power calculator to give you an idea of your financial capabilities.

3. Become a 'rentvestor'

Have you heard the term? With the current market conditions, it is becoming increasingly prevalent.

"Nearly a third of Australian households are renters"

Basically, you see your mortgage broker and take out as much finance as you need to purchase a rental property in a cheaper location. You then lease in your desired suburb, while your tenants pay off your mortgage.

The Australian Bureau of Statistics affirms that nearly a third of Australian households are renters, so you certainly won't be alone! Furthermore, it gives you a prime opportunity to try before you buy.

4. See a mortgage broker

We've saved one of the easiest for last. A competent mortgage broker will be able to analyse your financial position before partnering you up with the ideal home loan package.

This could result in you being able to borrow more money than you first thought, at no extra cost.

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