By Shane | Uncategorized

Sep 02

Buying a property is a big decision, both financially and emotionally. So it’s no wonder some people get a little bit scared. When you’re buying a house, there may be a lot to think about but it doesn’t need to be stressful. There are tips that can lead you in the right direction if you’re considering purchasing your first home.

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The first step to buying your dream house is saving for your deposit. Generally, a minimum of 5% deposit plus costs is usually required. The costs associated in buying a residential property- inclusive of stamp duty and legal fees – are normally about 5% of the purchase price, however you can consult with a mortgage broker to get a more accurate idea of costs. The bigger your deposit, the lesser your loan will be and the less you’ll pay in interest. It is highly recommended that you save approximately 20% of the property price if possible… however with sky-rocketing property prices, this may not be feasible.

Saving for your first home deposit can be challenging, but it’s a great way to get into the habit of setting aside money for mortgage repayments to show lenders that you’re capable of managing your funds. The following are 5 saving tips that will help you get you started.

  1. Create a monthly allocation to savings and stick to it as much as possible.

The best way to save is to pay yourself first by automatically transferring your savings into another account as soon as you get paid, so you will be less tempted to use it. Save 10% of your income, an old practice but definitely works well if you’re prepared to implement it. You simply need to pay yourself first before you pay anyone else.

The best way to manage this is to designate one savings account- preferably at a different bank to your normal lender, to make it difficult to access the money and then habitually transfer 10% of your net pay each month. Of course, if you’re looking to get into a property sooner, you may need to save more than this.

  1. Cut down on unnecessary expenses

These may include memberships you don’t use, meals out or new clothes. Even if it’s no fun, tightening your expenses a little can be an effective approach in saving money for your first home deposit.

It may mean that you have to skip on a few restaurant meals out throughout the month, or you may have to make your own lunch when you run out of cash just before the end of your pay cycle, but it will be worth it in the long run.

  1. Pay off your debt.

Now is the best time to look at your debt and work out how to pay it off as soon as possible. You may like to consolidate your debts to save on interest and charges, or start by paying down the debt with the highest interest rate first and work your way down.

This isn’t exactly a direct savings tip, but it is in a roundabout manner, as you’ll be minimizing interest payments. Paying off your debts make sense for two particular reasons- it will raise the amount of money you can borrow, and it will clear up your cash to use for mortgage repayments. It definitely pays to get a budget now so you can eliminate your credit card debt and personal loans before committing to a loan worth hundreds of thousands of dollars.

  1. Saving may take time, but your lifestyle doesn’t necessarily need to suffer.

Apply a budget with an allocation to everyday costs, so you can still manage to pay the bills and enjoy yourself. Record and analyze your spending over a month to uncover opportunities for savings. List down everything, including little purchases or one-off expenses, such as coffees, taxi fares, presents and eating out, as these everyday extras can add up over time. There are plenty of apps out there that allow you to accurately track your expenses. Alternatively, you can also work with a financial adviser who has a cash management/budgeting system in place.

  1. Use a designated high(er) interest savings account

Make your savings work hard for you by putting them into a high interest savings account that can’t be accessed freely. You’ll accumulate interest as you save, so you can apply for a home loan early. Interest rates may be at historic lows, but every dollar counts.

Always keep in mind that in order to save, you need to allocate your income. Consult with a financial expert such as your mortgage broker or financial advisor who can verify that you’re getting the highest rate for your savings, the lowest rate for your loans, and that you’re implementing your budget in the most efficient way for your lifestyle.

Most first time buyers wish to acquire a property that fits their lifestyle and which will increase in value over time so they can climb the property ladder in a few years time. Make sure to regularly communicate with your mortgage broker or financial adviser to have a sufficient understanding of all that is required and recommended for your next purchase so you can plan in advance.

Remember that your home loan deposit is regarded as your contribution to the purchase price of the property you want to buy. If you want to have your own house to call home, you’ll need to start saving.

The key to building up a deposit is to start-off saving as much as you can as soon as you can.

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Author: Shane

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