Buying a first home



One of the toughest parts of realising the dream of owning a home is saving for a deposit. The options seem pretty dismal – subsisting on a diet of beans on toast, never socialising or moving back in with the parents.

It can often seem too difficult, which sees many people commitment to a life of renting.

One of the first questions I am often asked is "How much do I need to save". There is also a belief that you must have 20% deposit to buy a property.

In fact most lenders today will actually finance up to 95% of a purchase price, through the use of Lenders Mortgage Insurance ('LMI').

LMI protects the lender, should a home loan go into default, guaranteeing that the lender will get its money back if the property needs to be sold and there is a shortfall in repaying the loan.

I still recommend people save 10% of the planned purchase price, as they will need about half of the savings to cover stamp duty, the lenders LMI fee and other associated costs.

So if I am buying a property for $500,000, how do I save $50,000?

As mentioned at the start there are the obvious options of moving home and cutting back on social and unnecessary expenses. These may hurt in the short term, but the reward is there for those which can stick it out.

Another option available is using the equity in the family home. This means your parent's offering their home as security for the loan, in place of a cash deposit. This approach is known as a family guarantee and does carry certain risks which your parents would need to assess.

The final approach would be to look outside the square to save, one option is to become a house sitter. Websites such as Mindahome connect house sitters with home owners and means you can avoid moving house, whilst not having you pay expensive rent and utility bills.

Regardless of which approach you take, starting a savings plan is the first thing you need to do. To help we have provided a budget planner which you can download for free and start using today. Alternatively if you would like to discuss your situation in more detail please contact us

Budget-Planner

For more information take some time to read some of our other articles:
     - First home buyer tips
     - Family guarantee home loan
     - Offset Home Loan FAQ

If you would like to know more or have some questions please feel free to contact us.