Saving For a Home

The immediate challenge of producing a deposit for your first home can be overwhelming, especially for low-income buyers.

A deposit of 10% is generally considered to be the minimum amount required for a mortgage. This is not necessarily true, as borrowers with higher incomes are able to gain a loan with a lower deposit than those with lower incomes. However, a 10% deposit is a good yardstick as the higher the deposit, the lower the debt and therefore a lower interest rate.

This means that for an average property price of $300,000, you should try to aim for a deposit of $30,000.

Consider the following methods:

Transfer your existing funds into a high interest savings account (research what your existing bank can offer or talk to your financial adviser to choose a competitive bank account). Then, arrange for a portion of your salary and other income to be automatically credited to this account.

Get into the rhythm of your repayments by saving the difference between your current rent or board and what you will be paying. For instance, a loan of $300,000 would cost approximately $2000 in monthly repayments (around $470 per week). If you currently pay $250 weekly for rent, then saving the difference before you move out will mean an extra $210 towards the deposit as well as allowing forward planning of coping with expenses whilst making repayments.

Do a budget and stick to it. Yes, it’s true – until you know where you spend your money you are likely not to know how to save it. Add up all your expenses for a week and then try to cut back on luxuries such as the coffee you buy in the morning or magazines. Bring lunch from home or purchase generic brands at the supermarket. You will be surprised how easy it is to save an extra $30-$50 per week.

Take the first step towards moving into your first home. Contact us.