5 tips to save money when buying your first home
Many people dream of one day owning a home, but the task is easier said than done. To enter the Australian real estate market, most people need a home loan and to do so you need an initial deposit.
Your deposit is determined by the total value of the home you plan to buy. Typically, a deposit should be 20% of the purchase price, but many lenders can accept deposits as low as 5%.
The current national average cost of a home is $ 719,209, which means that if you plan to put down a 20% deposit, you’ll need to save at least $ 144,000. When you factor in stamp duty and other potential charges, you will need even more. Let’s face it, this amount of money makes buying a home difficult for many first time buyers.
But Rome wasn’t built in a day, and your deposit won’t pile up so quickly either. So we’ve compiled a list of five ways to save for that deposit, and with a little diligence you will eventually be able to buy your own home.
The first step in budgeting is to document all of your spending each month, so you get a feel for where your money is going and opportunities to reduce your spending. You can use our nifty budget calculator to get you started.
Once you know where your money is going, you can consider cutting things, including frequent take-out or that TV or gym subscription you never use. Once you end up with the extra money, you can put it in a high interest savings account for a future home deposit.
What’s the use of depositing your house into a bank account if it doesn’t earn you money? Having a high interest rate savings account with little or no fees will actually earn you extra money that will help you reach your deposit goal faster. This means that you could enter the market sooner.
If you have any unused items that are taking up space in your home, you can sell them online to earn extra cash. Why not try out sites like eBay or Gumtree to sell the items you know in your heart that you will never use? This exercise machine purchased during lockdown and still in its box could be at the top of the list!
While this option may not be ideal for everyone, moving back to your parents’ home could help cut rent and lower utilities. A recent Corelogic study found that the average Australian spends around 29% of their income on rent (not including utilities). Cutting back on spending in any way in the short term could help you meet your deposit goal and move you closer to home ownership.
Alternatively, you can move to a cheaper suburb or find cheaper accommodation to rent while saving money. This slight inconvenience might be worth it once you have the freedom to decorate the walls in your own home.
As a first-time home buyer, there are several government programs to help you enter the real estate market. There is the First Home Owners Grant (FHOG) program which offers a one-time grant that should help you pay off your home – if you meet the eligibility criteria. Then there is the First Home Super Saver (FHSS) which allows you to save for a deposit using your super fund.
If you’re thinking about buying a home, check out Mozo’s first-time buying guides to prepare for your buying trip. Or if you’re about to save up to your deposit goal, start checking out potential home loans below.
* CAUTION: This comparison rate only applies to the example (s) given. Different amounts and terms will result in different comparison rates. Costs such as redemption or prepayment charges, and cost savings such as fee waivers, are not included in the comparison rate but can influence the cost of the loan. The comparison rate displayed is that of a guaranteed loan with monthly repayment of principal and interest of $ 150,000 over 25 years.
** The initial monthly repayment figures are only estimates, based on the advertised rate, loan amount and term entered. The rates, fees and charges and therefore the total cost of the loan can vary depending on the amount of your loan, the length of the loan and your credit history. Actual repayments will depend on your personal circumstances and changes in interest rates.
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