Buying a home is a major financial commitment.
But one of the biggest challenges is saving enough for a deposit. With most lenders requiring as much as 20 percent of a property’s purchase price, it can take several years of careful budgeting to save enough. And it doesn’t even include additional upfront costs such as:
● Property inspections
● Conveyancing fees
● Lender fees
● Stamp duty
Saving is a key step towards becoming a homeowner. Putting down at least 10 per cent is a start but saving more gives you huge advantages when applying for a loan as it means:
● Demonstrating a strong savings history
● Saving on monthly repayments and interest
● Having more lenders to choose from
● Not paying for Lender’s Mortgage Insurance
A larger deposit has clear advantages which starts by establishing strong saving habits. Here are a few tips to get you on the right path towards owning a property sooner than you think.
1. Track all Expenses
Where exactly is your money going each month?
One way to find out is to track your expenses to see where your money is going. This is especially useful to better understand your spending. Start by creating a simple spreadsheet or by using an app to keep track of your daily spending.
Then group your spending by categories (i.e. car, food, personal, house, etc.) for a better representation. The results can help reveal where you can reduce costs. Even cutting or reducing small expenses can really go a long way to building your savings.
2. Set a Target
Having a clear goal is a strong motivator.
Start by working out how much you would need to save. Most lenders typically require at a deposit of at least 10 per cent of a property’s purchase price. Keep in mind it doesn’t include additional costs of buying a property.
If average properties are $350,000 in the area you’re considering, then you know you need at least $35,000 saved. Knowing this gives you a much clearer objective that you can work towards. Set a timeframe based on your budget and how much you need to save.
3. Set Up Automatic Payments
Set up automatic deposits from your checking account to a savings account. You only need to set this up once and a set amount you designate will be automatically transferred to your savings account. This is a highly effective way to ensure you stick with your budget.
Speak with your financial institution to get this set up.
Have questions about saving for a down deposit on your first home?
One of the most important aspects to buying a property is the deposit. FHOC is here to provide assistance and answer any questions you have about the home buying process. Contact us today to schedule a consultation with one of our professionals.
First Home Owners Centre Contact Information
24/7 Sales Enquiry Line: (08) 6144 1088