Your First Home: How To Save Quickly & Sustainably
Buying your first home is a monumental occasion; it should come as no surprise then, that saving up for it can be quite the time-consuming process. And while there are no shortcuts to good old fashioned saving & responsible spending, The A Firm have certainly observed a few healthy habits that can nonetheless help you save faster. While these habits are overlooked by many, they can be picked up by anyone and everyone, regardless of geographic location, financial status, or age.
Save A Larger Deposit – At Least 20%
Without a doubt, one of the most important recommendations from The A Firm is to save at least twenty percent of your home’s estimated cost. This will allow you to put down a home deposit on your loan and avoid lender’s mortgage insurance as a first home buyer.
Lenders – especially banks – will charge you a lender’s mortgage insurance if you expect to borrow more than 80% of your property’s price. This insurance (typically a one-off fee) is designed to protect the lender in case you cannot ultimately pay back the loan. Therefore it is highly advisable to save a bigger deposit to avoid this fee. Saving a bigger deposit is also likely to put you in the habit of saving more efficiently.
Unfortunately, Lender’s Mortgage Insurance isn’t the only hidden fee you have to worry about; there are plenty more unexpected costs associated with buying a home, such as council rates and stamp duty. Luckily, The A Firm’s financial strategists specialize in navigating the fastest and most sustainable way to buying your first home!
Realistic Market Research
Preparation is key in any successful endeavor, and part of this preparation may well be ensuring your expectations are within reason. Many first home buyers subconsciously believe their first home will be similar to the home they grew up in. However, it is important to remember that your first home need not be your only home.
Purchasing a house may risk overextending your budget & mortgages are typically very long term. To avoid this, ensure you undertake proper market research in your local area & consider the following:
- Make a realistic “dream home”: The majority of first home buyers will not purchase the first property they “fall in love with.” Rejections are frequent, especially in a sellers market. Most buyers will go through four or five “dream homes” before they settle a purchase.
- Understand prices: Research the local prices of properties in your desired area. It is not uncommon for properties to sell for higher than their listed price.
- Determine your market: Are property prices stable, rising or diminishing? Adjust your saving habits accordingly.
- Consider all property types: It may be worth considering an apartment too, if you are looking for a house, and vice versa. Remember, this does not need to be your home forever, & most homeowners will be able to sell their 1st property at a profit after a few years.
- Location is important: Prices are typically higher in dense, suburban areas close to city centers. Prices tend to drop the further out you travel and may be easier to acquire for 1st home buyers.
Adapt Your Budget (If You Haven’t Already)
If you’ve been saving for a home deposit for quite some time, then its more than likely you’ve developed good savings & spending habits. But one thing to keep in mind is that owning a home is usually more expensive than renting due to rates & maintenance. You must take into account council rates and mortgage repayment. For now, try separating your accounts as if you already owned a home. Keep track of grocery costs, fuel, electricity, water and recreational spending. Work out a budget that works for you and also works to shave off that mortgage! The A Firm’s accountants are a perfect match for home buyers looking to sharpen up their property budgets!
Consider A Mortgage Broker
One thing to consider is hiring the assistance of a mortgage broker. Many first home buyers assume that the big banks – commonwealth, westpac, NAB, etc – are the only places to borrow a home loan. However, there are plenty of smaller, independent lenders who may offer a loan more fitting for your circumstances. A mortgage broker will help you navigate these lenders & provide valuable insight on things such as fixed vs variable rates, government schemes to help first home buyers, and local knowledge. It’s good to keep in mind that loans need not be cookie cutter, but can actually be quite tailored to you.
And there you have it! Saving for your first home can be a long process, but it doesn’t need to be intimidating. And if you’re looking for an even faster way to save for your first home, then The A Firm can offer you expert financial advice on how to get there! Book your free call with our lovely team today.