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Getting a deposit together for your first home requires a good savings plan and make sure it’s a plan you can stick to.
For many first home buyers, getting a deposit together can mean some big lifestyle changes. Whether that means cutting out certain social occasions, cancelling subscriptions or less shopping sprees. If you aren’t saving enough now, you need to firstly work out where you are spending money.
Defining a financial plan will make it much easier to organise what you spend money on and increase your savings. Some things which seem so insignificant like buying a $4 coffee everyday, still work out to be another $121 a month you can put towards saving a deposit for your first home.
Live well within your means & you’ll have that deposit in no time. The general rule is the larger your deposit amount is, the better mortgage deals will be offered to you.
Make sure that your credit rating is high and the best way to achieve that is to get rid of any debt that you might have. Pay off those with the highest interest rates first & try to do it ASAP.
Paying off the minimum repayment every month isn’t going to do it. Even if it means sacrificing a couple of months of savings, its important to try and pay off as much as possible.
Buying your first home is probably going to be the most important decision you will make in your lifetime. You not only need to take into consideration the cost but also the location, size & your future. All of this requires a lot of hard work & knowledge, if you’re living in Sydney or Melbourne, buying your first home can seem even harder in 2017.
The first consideration is always going to be ‘can I afford it?’… It’s a question which seems straight forward, but if you’re not currently renting & still living at home, monthly repayments on a mortgage can be a big shock to some. Making a few strict lifestyle changes before committing to a home loan can ease the change, try putting aside what you’d be paying in repayments monthly to help you adjust to what is usually a huge part of your income going towards bills. You can easily calculate an estimate of what your repayments should be, by using a loan repayments calculator which you can find here.
Aside from mortgage repayments which can fluctuate over the borrowing period, you need to also consider other costs associated with owning your own home. First of all there’s stamp duty, which is a tax on the property transaction that is charged by each state and territory in Australia. The stamp duty rate will depend on a few different factors such as the property value, if it’s your primary residence, an investment property etc.
On a $700k property for a first home buyer in NSW, the stamp duty would be an estimated $27,263.
A lower interest rate can also lead to lower monthly payments. However, simply extending the life of a loan can actually mean you’ll pay more for the loan over the long term.
If you’re borrowing more than 80% of the property price, you also need to pay for lenders mortgage insurance (LMI). Other insurances you may not be used to paying include property insurance for protection against fire, theft and weather damage.
Get in contact with Euphoria Loans for a full breakdown of costs associated with buying your first property.
After careful considerations, you have finally reached a decision to buy your first home. We understand that this decision is as daunting as it is exciting, you are about to take the biggest financial move in your life. And so, what’s next?
You’ve fixed up your debts, saved for a deposit & have an idea of where you want to live. Now you need to be realistic about how much you can afford to borrow. The most sensible approach is to buy a home you know you can afford; this means knowing that you can easily pay it off in due course. Home loan experts suggest that you should keep your house payment within thirty percent of your monthly income (gross). To get a good idea of how much you really can afford to spend/borrow, you can use a borrowing calculator here.
Your next step is to speak to a mortgage broker. The mortgage brokers at Euphoria Loans offer great value in helping you understand different home loan options and recommending the ones which are best suited you. We’ll do all of the research and assess the loans available on the market. We also help you work out any additional costs you need to set aside like stamp duty, legal fees, surveyor charges, lenders mortgage insurance, etc.
Using a mortgage broker is a free service, will save you time & money.
Pre-approval effectively gives you the green light on a home loan even when you haven’t had an offer accepted for a property. The loan limit is usually determined by your ability to meet the loan repayments. Most are valid for between three to six months
Having a home loan pre-approved gives you the freedom to make an offer on a property knowing that your finance is already organised, so you can act quickly when you find your dream home. You’ll have a clear idea of which properties to go for, because you know exactly what you can afford, then once you find the right property, you’ll be able to focus on the purchase rather than having to arrange for the finance at the time. A pre-approved loan will help to make the sale process a smooth one. When you make an offer, things can move quickly.
Once you’ve decided on a lender, our mortgage brokers will organise the pre-approval for you.
If you’re borrowing more than 80% of a property’s value, you would generally be required to get Lenders Mortgage Insurance (LMI).
For many first time buyers being able to pay LMI instead of saving a 20% deposit for their first home has it’s benefits. LMI gives you the potential to own your first home sooner. With some lenders you can borrow up to 95% of the property price. LMI is usually paid as a one-off lump sum at settlement but it can also be added into the loan. Your dedicated mortgage broker at Euphoria Loans will help to decided which option is better for you.
Once you have your loan pre-approved, it’s time to start house hunting.
In Australia, you can buy a property either privately by putting in an offer on a home, or going to auction. Private sales are more popular from a buyer’s perspective as you can negotiate & you can have more control over the purchase.
In Australia's largest cities, we are seeing many more properties go to auction. In Sydney & Melbourne, demand for homes is still on the rise, creating a lot of competition. Buying a home at auction gives you little room to negotiate the terms of the sale. When your bid is accepted, you need to put the deposit down immediately. It’s always important to have your limits set for what you can afford, before entering an auction.
A crucial part of the buying process is to have a home inspection done. It will tell you if there is are any hidden issues with the home, and if there’s anything serious, you can revert your decision at the right time and look for a better home. Many buyers skip this step when buying at auction, only to learn of the underlaying problems once they have moved into their home
The most successful people in life are the ones who plan everything according to their needs and their monthly income. Buying a home is also such a decision which needs a lot of planning, because without planning it is almost impossible to arrange for the money required to buy a home.
Just because you’ve only just bought your first home, it doesn’t mean you shouldn’t be planning how to pay if off as quickly as possible. It’s important to plan how to repay the loan & if you want to pay off your mortgage quicker, it’s going to require that little bit more planning. There are plenty of online calculators available to calculate financial benefits you can get by repaying your home loan quicker.
There are many advantages of repaying your home loan off quicker. The first method & most obvious is to increase the monthly installments of your home loan. This will lower your burden in coming years and will also give you a financial saving. Your future installments will gradually decrease and this will lower your mark-up also.
Making partial payments is another very good technique to repay your home loan quickly. Try to save every penny you can and pay the saved money at the end of the year. For the first few years, it seems you are paying the interest and the principal is still the same. Therefore, to repay it quickly, understand the reasoning and try to hit the principal to minimise it as soon as possible and avoid financial loss.
It’s important to check if its worth refinancing every few years to lower your interest rates. Lenders are always changing their offerings & if you’ve had the same mortgage for a few years, there’s usually a loan out there more suited to your current position. Euphoria Loans will always keep you up to date on any suitable options.
