With property prices remaining so high and out of reach for many young Aussies, saving a 20% deposit has become a tough gig for most First Home Buyers. In this article CRAIG WILSON, CEO of PiC Group, provides some tips and guidance on how First Home Buyers can increase their savings ability and move more quickly towards purchasing a property they can call home.
You want to buy your first home, but saving for one can be a pretty daunting task when you consider how much it is going to cost.
Saving that 20% deposit whilst trying to maintain a decent lifestyle standard that doesn’t consist of living on 2 minute noodles with a zero social life is a challenge.
Here are my tips to help you get started on the right track.
Decide on new or used – The number one step is to figure out if you want to buy brand new or something older which you can potentially renovate down the road. I suggest starting with this because you will be able to calculate the next step easier if you know which way you prefer.
If you don’t have a preference then that’s okay too. Currently, there is a First Home Owners Grant (FHOG) offered to first home buyers that purchase a brand-new property.
This can also be available for very heavily renovated properties – where all or most of the structural or non-structural components of the property have been removed or replaced.
In Queensland, the current grant is $15,000 and if you are buying house and land you can also get stamp duty rebate on the vacant land only.
Set a realistic budget – Get real with your budget – and I mean really real with it. If you know you will have 3 coffees a week and go out for dinner add that into your budget.
The worst thing you can do is work on a budget that is unrealistic but makes you feel good to write it down. You need something manageable.
Start with your fixed costs which could be, rent, power, insurance, car registration, car repayments etc. Then add on the flexible outgoings.
Sometimes by just doing this process you can see the big hole you’re creating through entertainment or eating out – which could be easily fixed with a few adjustments such as limiting your spend on these items to once a week or fortnight.
If you are applying for the FHOG then you can calculate that money as going towards your deposit as well!
Pay down your debt – Pay off some debt along the way and start with your credit card/s. Credit card debt can easily mount up each month and with such a high interest rate payable, this type of debt can get out of hand quickly. It’s also important to note that banks and lenders view credit card debt as bad debt.
If you have a large credit limit, you should also consider reducing it. Even if you haven’t spent up to the credit limit on your card a lender/bank will assess your ability to pay your home loan on the basis that you have spent right up to your current credit limit. Why? Because you can if you wish.
So by reducing the current credit limit on your card not only will the temptation to spend be gone, you will also be in a better position when you are ready to apply for a home loan.
However, don’t let paying off debt take over putting savings towards your deposit, just make it a part of your focus as well.
Increase your savings – You will need to show a bank/lender that you have the ability to put away regular savings.
You can save this into your deposit account or look for ways to collect some extra interest along the way with a higher interest earning account.
A lot of different banks offer these types of accounts. It’s where you put in a minimum amount each week and don’t withdraw and in return you get some extra interest earnings along the way.
It’s a great habit to get into and being vigilant and disciplined by not touching your savings will do you well when applying for a loan.
Look around for deals on everything! – Nowadays online shopping has taken off and the good part is that it allows you to shop around and compare from the comfort of our home.
You might even consider following some social media influencers so you can grab their codes and take advantage of the savings on offer.
Try to buy bulk where you can to make a saving and when at the supermarket get into the habit of looking at the price per unit on labels so you can assess the real price or discounts.
Use your coupons or loyalty cards for items like fuel – even filling up with fuel on certain days can be much cheaper than a Friday before the weekend.
If you are looking for the deals you will see them, but it’s important to not fall into the trap of buying something on special that you know you don’t need.
Craig is the founder of PiC Group since 1993 and SiNC Surveys, and a successful private investor in his own right, coming from a background in the insurance, financial planning and real estate development industries.
General Advice Warning: This blog is not designed to replace professional advice. It has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the advice, in light of your own objectives, financial situation or needs before making any decision as to what is appropriate for you.