So, you’ve made the big decision to buy your first home. This will likely be one of the biggest purchases you make in your life, and it requires some serious planning, sacrifices and commitment. Here are our top tips for budgeting and saving to achieve that great Aussie dream of owning your home.
Tip 1: Know the true cost of purchasing a home
Before you start saving, you need to understand just how much money it will take to buy a home. For most home purchases you’ll need a 10 per cent deposit, so research properties in your areas of interest and actually calculate how much you’ll need for your deposit. You will also have other costs like stamp duty, conveyancing fees, home inspection reports, and lenders mortgage insurance, to name a few.
You also need to consider the ongoing mortgage repayments for the other 90 per cent. While your financial institution will only loan you an amount it believes you can realistically repay, you still need to be comfortable with servicing that debt for the foreseeable future.
Tip 2: Make sure you and your buying partners are like-minded
It’s important to discuss your budget and savings goals with your buying partner or partners. You need to have your sights set on the same financial goals. Make sure that you’re all committed to the savings strategy and consistently moving towards the same goal. Review your strategy regularly and assess if any parts need modifying.
Tip 3: Learn about assistance packages
There is a variety of government assistance packages available to first home buyers, including the brand new First Home Loan Deposit Scheme. Available from January 1, 2020, the First Home Loan Deposit Scheme makes it easier for first home buyers to get into the market. Through this scheme, first home buyers can get a home loan with only 5 per cent of the deposit while avoiding having to pay Lenders Mortgage Insurance (typically a requirement if you have less than 20 per cent deposit). Research this, and other assistance packages that you may be eligible for as a first home buyer.
Tip 4: Understand your financial position
One of the first steps of designing an effective saving strategy is to have a strong understanding of your financial situation. Understand your financial standing by calculating your total income and expenses. This means calculating your income from all sources, including wages, small business income, and interest on investments.
In addition, you'll also need to work out your expenses which can be a challenging exercise. But by being as thorough as possible and realistic in your estimations, you'll be in a much better position to create a budget and savings plan.
Tip 5: Pay all loans and bills on time
Give priority to debt repayments and regular bills, as doing so will help to keep your credit record in good shape. When you apply for a home loan, finance companies will look at your credit record, and a good rating can be a deciding factor in whether or not your loan is approved. Your loan application may be rejected if you have overdue unpaid bills or you have missed repayments on other debts.
It can also help to reduce or pay off other debts before you apply for a home loan. This shows that you are a good borrower, and it frees up extra cash to go towards your deposit.
Tip 6: Cut spending, grow savings
This tip might seem obvious, but it’s the key to saving enough money for a home deposit. Identify areas where you can make cutbacks and live without some luxury items like restaurant meals, beautician visits, concert tickets or overseas holidays. To track your savings progress, open a dedicated savings account with a higher interest rate than an everyday account, or even lock your money away in a term deposit so you can reach your financial goals sooner.
Tip 7: Boost your income
We all have potential skills outside of our regular jobs, so explore options to add to your income through freelance work or put your hand up for some overtime. This may leave you with less leisure time, but it’s a great way to reach your savings goal faster.
Tip 8: Never lose sight of the end goal
There may be times when you’re tempted to blow your budget, and you might allow yourself an occasional luxury. But if you’re serious about buying your own home you’ll have to be willing to make some sacrifices. When you’re tempted to dip into your savings, firmly remind yourself of your end goal – a wonderful new home for you and your loved ones in a great location like Catherine Park Estate.
Read more top tips for first home buyers on the Catherine Park Estate website. Our experienced sales team can take the stress out of being a first home buyer by helping you find your dream first home. Get started today.
