Tips For Saving For Your First Home

The first question we get asked by most first home savers is, ‘what are your tips to save for our deposit?’ Some are aiming for a 20% deposit, and others are happy at ten percent, but all feel like they’re years away, especially as house prices rise while they try and save. One thing we have seen works no matter how much you’re trying to save is discipline. As with any goal you want to achieve, you have to have a plan and the tools you need to get there. Read on for our top 7 tips for saving for your first home!

1.Budget. Yes, it sounds boring, but a structured budget is the key foundation to managing your saving. To spice it up you can use an app to help, like our free tool found here, that identifies where you’re spending money, and lets you set yourself a challenge to cut back in areas like eating out, shopping – after all, you have to make some sacrifices to get to the goal of owning your own home! Depending on your living arrangements, we recommend saving between 20-50% of your income.

2.Bank accounts. Once you have your budget sorted, it’s time to get your bank account structured to work for you. We use the bucket strategy – an account for each goal. You ought to have a first home savings account (by the same name),and another for travel, essentials, lifestyle, and so on. This is one of the best strategies you can use, and it is extremely effective, especially if you’re out on the weekend, spend your lifestyle money, and realise you have to top it up from your first home savings!

3.Borrowing money. You will have to borrow money to pay for your house. How do you do this well? The best way is to use a mortgage broker – a good mortgage broker makes your buying experience much simpler. They will be able to calculate how much you can borrow, but most importantly they will shop around for the best deal. Of course, the more you borrow, the more you must repay. To ensure you are comfortable with the prospective repayments each month, check it against your budget and see how much you will have left over each month. If in doubt, ask us about the top mortgage brokers in your area – we are fussy about who we use.

4.Buying your house. Do your home work! Talk to agents, search online, go to open homes –this will be the biggest purchase of your life, so spend time understanding what you’re buying. You will learn what is good value and what is rubbish. This will also allow you to gauge different price ranges, and as always the cheaper you can buy the less you need to save and the less you need to repay.

5.The bank of parents. This may not be an option, but one way to get a house sooner can be to leverage your parents. While it’s not ideal, they could be guarantors (use some of the value of their property for the lender to leverage to provide money towards yours).

6.First Home Super Saver Scheme (FHSSS). As of July 2018 eligible first home buyers who make voluntary contributions of up to $15,000 per year into their super can then withdraw these amounts and any additional associated earnings for their deposit. The scheme intends to help first home buyers grow their deposit more quickly.Additional rules may apply in your situation, so ensure you do your own research and talk to us before making any decisions.

7.Government grants. Don’t forget there are many different grants available to first home buyers, with the amounts depending on which state you live in and the typeof property you are purchasing, as well as how much your home will cost. All of these will potentially help you get your first home quicker.

To wrap it up, lets talk about some potential extra costs when purchasing a home you will need to borrow or save for.

• Lenders Mortgage Insurance, or LMI. A lot of first home buyers don’t realise that they may have to pay LMI depending on the level of their deposit. As a general rule, anything less than a 20% deposit will likely incur LMI, and should be taken into account when you’re considering how much money you have available to you initially.

• Stamp duty. The amount will depend on the value of your house. As a first home buyer, you may be entitled to the First Home Buyer Duty exemption or concession depending on your state of residence. For example, if you purchase a house that costs $600,000, your stamp duty will be $0. If you purchase a house costing $700,000, the stamp duty is$24,713! Additional information for Victorian buyers is here, as well as a stamp duty calculator for Victorians here.

• Other costs include an estimated $1800 for the Titles Office, to register the transfer of land and mortgage, $1000 of legal costs, and $395 of Loan Establishment fees some lenders charge to start a loan.

If you have any further questions or want to book a free financial health check to see what you could be doing better for your situation, then book a session now to start saving for your first home quicker.