With the prices of Australian homes rising, the dream of homeownership is being pushed further out of reach for many Australians. First-home buyers have been confronted with an affordability challenge as they have been required to save for a larger deposit and hence take on more debt to enter the housing market. So, if you have been thinking about purchasing a home, it is time to start saving for that down payment.
For many first-home buyers, the ability to save up enough money to buy a home can be very overwhelming and can feel very much impossible. However, with a few simple strategies and a solid saving plan, saving for a home is more obtainable than you think.
For more information visit this site: superratmachine
How much money do I need to save for a down payment?
Usually, many homebuyers think that they will never be able to purchase a home as they cannot afford a 20% down payment. Nowadays, many lenders do not require 20% down. The 20% myth springs from the private mortgage insurance (PMI) rule that most mortgage investors and lenders have. If you have less than a 20% down payment at the time of close, you may need to pay for private mortgage insurance to protect the mortgage investor and the lender if you fail to fulfil your loan. Having a 20% down payment can save you money over time. However, it is not a necessity to purchase your home. You may be able to get an ordinary loan with as little as a 3% down payment.
Once you consider how much money you can afford, you will be able to get an accurate assumption of what your down payment could be.
Now that you understand how much savings you need to purchase a home, here are five tips and tricks that a leading mortgage broker would recommend for you to start saving for your future down payment.
1. Develop a Budget
The first step in your saving process is developing a well sought out budget. It will be impossible for you to redirect money if you are unsure where your money goes each month.
Look through your credit card payments and bank statements to figure out where you are spending the most money. Account how much you spend on essential commodities such as utilities, rent and your student loan payments. Then note how much you spend each month on unnecessary things like going to restaurants and the movies.
Once you group your expenses, be on the lookout for areas where you could reduce your expenditure. Ensure you set a practical budget for each group and be determined to stick by it. To make things easier, set a certain amount each month to be put away towards your down payment.
2. Cut Out Bad Habits
A good trick to save you hundreds of dollars a year is to cut out or reduce if not one but multiple bad habits. Contemplate laying off these habits and redirect the money towards your down payment fund.
If you are an online impulse buyer, try unsubscribing from marketing emails to avoid the temptation of new deals arriving in your inbox. This will help you steer clear of clutter in your home and save you some money.
Another widespread habit that many individuals acquire is getting takeout. There is no doubt that getting takeout and fast food is great, but it is very uneasy on our wallets. Opt for cooking homemade meals each week instead of ordering out.
3. Automate Your Savings
Utilising an automatic savings plan is perfect if you have trouble saving and putting money aside. With this sort of plan, you can establish a certain amount of money to be transferred into your saving account from your everyday spending account at fixed intervals. For example, you can put away $500 each month and you will set yourself up for success. After this is all set up, you don’t even have to refer back to it as the transfer is done automatically.
With that being said, an automatic savings plan would work best for those individuals with consistent incomes. If, for instance, your income varies each month or you are unsure of the amount of money that will be in your account at any particular time, you may be better off transferring these payments manually when you are sure that you have the funds available.
4. Manage Your Debt
If you are on a journey to purchase a home, redirecting your surplus income towards your debt may seem unreasonable. Although, one of the first things that lenders look out for when considering you as a mortgage candidate is your debt-to-income ratio.
You will be considered a less favourable candidate if you have loads of debt. This can mean that you will be compulsory to pay an excessive down payment and pay more in interest.
You must minimise your debt before you apply for a mortgage loan. Note exactly how much you owe on your credit cards, personal loans, auto loans and student loans. Create a sufficient plan to tackle these debts. Speak to your local finance broker for the finest alternatives for how you can manage numerous debts.
5. Consider Downsizing
A brilliant and fast way to put more money away to fund your down payment is to downsize. When you downsize, you are minimising your expenses and living below your means whilst in the process of saving. You reduce the amount of money put towards your mandatory expenses and thus direct that extra bit of money into your savings account.
Some great ways to downsize are to move into a smaller apartment, sell one of your extra vehicles or even move to a more affordable area. Who knows, you may discover that you enjoy living a simple life.
Are you ready to put these tips and tricks into action? Speak to a reputable mortgage broker today!
Overall, there are several strategies that you can implement in your everyday life to save for your down payment sooner. Having a savings plan and setting goals can lead you to build that house deposit and become a homeowner.
Ensure you take your time to apply for a home loan and make sure that you do your research. It is a good idea to get in touch with a reputable mortgage broker so that they can issue you with tailored advice for you to understand what tips will benefit you most.