- Posted 03 Sep
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As home prices continue to rise, the average first home buyer is having a tougher time saving for a deposit and it’s taking longer to get a mortgage sorted.
Low rates on savings accounts have only added to the problem, making it harder to accumulate interest. Are their any tricks for speeding up the process? Let’s look at a few tips that may help you get into your new home faster.
This is never a get rich quick approach, but setting a realistic budget and sticking to it is the tried and true way to accumulate savings day after day, month after month. If you don’t have a working budget, start by tracking everything you spend over a few weeks so you understand your spending categories and where your funds are going.
Then look at what you can cut back on. Set aside a small savings account for emergencies such as car repairs, and then put away everything else into saving for your deposit. The Australian Securities and Investments Commission offers a variety of planning tools that can help you with budgeting and saving.
Research interest rates
Return rates on savings have been falling in recent years, but a little research can help you find a better place to invest your funds. Term deposits are one such option. They are a cash investment that a bank holds for a specific time period or term, usually between one and five years.
Term deposits are a popular choice when saving for a home loan because the investment is safe but the rate of return is higher than for a regular savings account.
Consider a smaller deposit
Property investors may have to put down the traditional 20 per cent, but if you plan to occupy your property and have decent credit, chances are you’ll be able to move in sooner by putting down a smaller deposit. The downside is that you’ll need to pay lenders mortgage insurance (LMI), a form of insurance that protects the bank if you default on your loan.
One smart approach is to meet in advance with a broker who specialises in mortgages. They’ll help you determine the size of home loan that you qualify for, which will determine how much you’ll need for a deposit. With LMI and good credit, you may be able to borrow up to 95 per cent of the home’s value, meaning you may already have enough saved.
Explore grant options
If you are a first home buyer you may be eligible for a First Home Owners Grant (FHOG), a Federal tax-free grant that can count towards your deposit.
To qualify, you must be an Australian citizen and you or your partner cannot have owned a home before. There may be other restrictions depending on the state where you are purchasing, so you’ll need to read the fine print to determine eligibility.
Certain territories and states may offer other incentives, so it pays to research your options.
If you are planning to purchase your first home, let Australian Credit and Finance help you navigate the waters and help you find a mortgage to suit your needs. Contact our experts today for the best customer service and a loan that meets your situation.