Buying your first home is an exciting and life changing event, but it can also be very intimidating and stressful. Your first home will probably be the most expensive purchase you will make, so it’s important to ensure that your finances are in check before you take the step into home ownership. Here are our top four tips to help saving for your home deposit that little bit easier:
1. Cut down debt
Cutting down your debt makes sense for two main reasons: Paying off current debt will increase the amount of money you can borrow, and it will free up cash to use towards mortgage repayments. We know that paying off debt isn’t easy, but there are a few simple steps to simplify the process. First, you should start by checking your credit card, personal loans and any other debts in your name and begin by paying off the lowest amounts in full to decrease the number of debts you currently have.
It is important to pay your credit card bills on time, defaulting can drastically impact your ability to get approved for a home loan. When applying for a home loan it’s important that you have as little amount of debt as possible as this will help increase your borrowing power and also put you in a low risk category, which will give you more option for your home loan package.
Your home loan should be your top priority and to do this, you will need to get rid of any unnecessary credit cards, finalise car payments and pay off any other large amounts of personal debt.
2. Set up a special savings account
Saving for your home is great, however as you see the money start adding up in your savings account, it can become all too tempting to spend. Setting up a competitive and restricted savings account that will reward you for saving, but penalise you for withdrawals can be a great way to increase your rate and amount of savings.
Accounts that penalise you for withdrawing numerous amounts of money and offer high interest rates will encourage you to save at a higher rate than you currently are. If you are going to be keeping large amounts of money in your savings account, make sure the banks are rewarding you for this with generous interest rates as this will edge you closer to your first home deposit.
3. Put your goals in writing
When setting your goals, it is important to be specific, realistic, and always remember to write down your goals. Keeping your goals simple and giving it a timeframe and a dollar amount is a sure fire way to keep you on track.
Writing goals down has many benefits, specifically the action of writing. This allows you to free up space from your mind whilst encouraging you to clarify what you really want and take action in reaching these goals. A great place to start when writing down saving goals is, to write down a monetary amount you want to save and how often you want to save it, this will help to set up a timeline of how long it will take to achieve your deposit amount.
We recommend writing something like ‘I will have $xx saved before the end of 2015’ or ‘I will put aside $xx every fortnight to put towards owning my own home’. These will help you work towards something short term and long term, however it is important to note that your goals must be realistic after you have taken your budget into consideration.
4. Don’t be scared to get professional help!
Before taking the plunge, it’s important to do research and get professional advice to put you in the best possible position. Seeking advice from a mortgage broker will help you understand all the options currently available to you to help make the right decision for you.
A mortgage broker will ensure that your finances are in order and will advise you of your borrowing power based on your deposit amount. Seeking advice from a mortgage broker is a great first step into understanding your financial position, and will give you better idea of how long it will take before you can successfully put down a deposit on your very own home.
Written by Cale Walsh.