Buying your first property might seem like an impossible dream, especially if you are on a lower salary. But it can be done, all you need is a plan. Here are five steps you can take to turn your dream into reality.
1. Make a plan
The very first thing you need to do when you’re saving for your first home is to work out how much you need to put down as a deposit. If you plan on buying a $400,000 property you will need at least a 10 per cent deposit, plus enough money to pay for expenses such as lawyers’ fees and conveyancing.
If you need to save $45,000, figure out how you can much you can afford to put aside each week, then do the sums to work out how long it will take you to reach your goal. Let’s say you think you can save $280 a week. Using the figures above, this means it will take you around three years to save your deposit. This figure becomes more achievable if you’re buying a property with a partner and can split the savings between two – then, you will each need to save $140 a week.
2. Redirect your spending
Saving for your first deposit usually means you’ll need to take a really good look at what you spend your money on now and make some adjustments.
“I only started saving for my deposit about two years ago,” says Mike Richards, who’s actively looking for his first property. “Before I started saving I would go out four or five nights a week, which really added up. Now, I go out one night during the week and once during the weekend. It’s saved me about $200 a week, which I’ve put towards my deposit,” he says.
If you are paying a lot in rent, or have a lot of expenses, consider ways you can bring down your costs. You might choose to stay at home longer, or house sit, there’s lots of ways to get creative around your budget and the sacrifice will mean that one day you can have your own place.
3. Save as much as you can
It’s worth saving as much as you can before you put an offer in on your first home to reduce the amount you’ll pay in repayments when you do buy a place. Saving, say, an $80,000 deposit instead of a $40,000 will help reduce your repayments and save you money on costs such as income protection and lenders’ mortgage insurance. The Commonwealth Bank has some great calculators that can show you what a difference it makes to put away as much as possible. Plus put your savings in a high interest account – research the best deals around and head into a branch if you need some advice.
4. Go in with family and friends
An option to reduce your overall costs is to buy a place with a friend, partner or relative. “I bought a flat with a mate about six years ago so I could get a start in the property market,” says Mitchell Cooper. “The way it worked out, we both have separate mortgages on the property and neither of us is liable for the other side’s mortgage. I’m about to buy my mate out, but I would never have been able to own such a great flat if I had to buy it by myself when we first purchased the property,” he says.
5. Take advantage of government incentives
It’s also worth looking into government incentives first home buyers can access to buy their first property. For instance, first home buyers in many states receive a stamp duty exemption when they buy a new property. But check the rules because they differ from state to state.
If you’re ready to apply for your home loan, you could go into the draw to win $250K. For more details, check out our Start competition.
What are you doing to save for your first home?