Buying your first home is daunting and hard, but it’s not impossible.
The average first home buyer in Australia is 31-33 years of age, has tertiary or tradesmen qualifications and apparently doesn’t eat smashed avocado. For me and David, that age was 23 and 25. So statistics don’t mean much when it comes to buying a house.
But how did we manage to afford to buy a first home? It all begins with saving money…
Set your goals
Set the goals you want to achieve when it comes to saving, but make sure these goals are realistic. Saying you want to save the entire deposit in 12 months might just not be possible. It wasn’t for us! We budgeted for our bills and expenses and put the rest into either our house fund or holiday fund. For us the split was about 70/30.
Know what you can afford
Calculate your regular expenses and deduct that from your salary. You might find that a house around the $1 million mark is out of the question. Knowing what you can afford will give you an idea of how much you need to save for a deposit and which suburbs or cities you can afford to buy in. Don’t forget to consider the other costs associated with buying a house like conveyancing and bank fees.
Save your deposit
Many banks and lenders recommend saving a 20 per cent deposit. Having a bigger deposit means you’ll have to borrow less. That means you’ll have lower regular repayments, and you’ll pay less in interest over the lifetime of the loan. However, 10 per cent is enough and some banks now even let you borrow with just 5 per cent. But doing this, you’ll need to take out Lender’s Mortgage Insurance or pay a Low Deposit Premium.
Speak to a mortgage broker
Mortgage brokers are a great resource to utilise in your quest for a first home. Best of all, they’re free! Mortgage brokers exist to make it easier for you to manage your paperwork, especially when dealing with banks or lenders. It’s never too early to speak to a mortgage broker who can assess your unique situation and make recommendations. David and I spoke to a mortgage broker to organise our pre-approval because neither of us had the time to deal with that amount of paperwork.
The naysayers will tell you that you spend too much money on coffees and avocado, but it’s important to let yourself enjoy life. Budget yourself some spending money each week so you can still catch up with friends over dinner or go to that concert on Saturday night. You’ll enjoy saving more if it’s fun.
What do you do to save money? Let me know in the comments below!