How To Save For Your First Home Deposit
Saving for a first home deposit is seen somewhat as a rite of passage into ‘true’ adulthood. It’s almost a coming-of-age ritual in Australia; where owning property is seen as a staple of a successful life. Despite the accolades which may be conferred to you by friends or family as you buy your first home, saving up for a deposit in the first instance can be challenging and require significant sacrifice. Starting from scratch can be incredibly daunting given the value of the nest egg you will require as capital to secure the loan, however there are questions you can ask yourself and strategies you can employ to make this task more digestible.
Speak With a Lender Early in the Process
It can be helpful to speak to a mortgage lender or broker early in the saving process to understand what your borrowing power is given your current income and expenses. There are loads of borrowing power calculators online which can give you a rough indication of what you can afford to borrow given these factors and your current savings.
Take Advantage of Options to Reduce The Value of the Deposit
There are several options first home buyers can take advantage of to reduce the value of the deposit they will require to secure their first property. Lender’s mortgage insurance can be helpful if you don’t have the full 20% needed to get a loan. Similarly, government schemes can reduce the amount you need to get a loan, for example, by allowing you to use capital in your superannuation account to fund a home loan deposit. Guarantor loans can also help reduce the size of your future deposit by using family assets as collateral during the loan acquisition.
Ask Yourself These Questions
One of the most challenging things for first home buyers is aligning their expectations of a dream home with the reality of the market. It can help to think of your first home as a stepping stone on the road to owning your ‘Castle’, rather than the end goal. Before you become too invested in buying a property which, in reality, isn’t a good fit for your needs, you should ask yourself the following questions:
- Will buying a house make your life better or worse?
- Could your goal of buying a house be an unrealistic one?
- How much sacrifice is too much?
- What will your cash flows look like?
- What do the mortgage repayments look like?
Take Small Steps
Once you have done the hard work and figured out what a realistic goal is and how you’re going to achieve it, there are some things you can start doing now, while you begin to save for your deposit.
- Sort out your savings habits: start to save diligently, organise your bank accounts and automate your finances.
- Research any available government schemes which can help you get started.
- Speak to a mortgage broker/mortgage lender to make sure your goals are achievable.
- Speak to parents about the possibility of a guarantor loan.
- Sort out your super, insurances, etc: make sure you’re not paying too much in fees and work out whether these assets can be used to help you secure a loan.
- Start to learn about the property market, for example, regulations, state-specific fees, property jargon, auction processes etc.
Contact Pillar Financial
Call our friendly team on 1300 730 309 or reach out via our contact page to ask what we can do for you as you begin your journey towards saving for your first home deposit.