Owning your own home is the great Australian dream, yet for many these days that’s exactly what it can feel like – a dream. But no matter where you are in Australia, buying a home to live in or as an investment isn’t impossible.
Here are five steps you can take to help turn the dream into a reality.
1. Analyse your current spending
First, you’ll want to take stock of your current financial situation and spending habits. Gather as much information you can on what you’re currently spending. Group your spending into different categories, (Spending and Saving) making it easier to see where your money is going.
2. Set a budget
Almost all good saving plans start with a solid budget. Once you know how much you’re spending, try to find areas where you can cut back.
Some changes to your usual spending habits will make a bigger difference than others. Scaling back your daily coffees can be great start, but moving back home for a short while (if you can) is likely to make a much bigger difference to your bottom line.
Once you know how much you’ll be spending each week, decide how much you can start saving. You’ll want to save as much as possible, but make sure your budget is achievable – you’re likely get more out of 12 months of moderate savings than 12 days of big savings. If you can, save a similar amount to what you expect your home loan repayments will be – that can help you budget over the longer term.
3. Get on top of your debts
It can feel hard to think about long-term saving if you’re struggling just to keep on top of the debts you already have.
Consolidating your debts can be one smart way to create a path forward out of multiple payment dates and interest rates. And the fewer debts you have, the more likely your bank will look favourably on you when the time comes to deciding on your home loan application.
4. Start saving
Ideally, you’ll want to save as much as you can for a deposit. This will mean you don’t need to borrow as much and the less you’ll pay in interest. If you have a smaller deposit your bank or lender may charge you Lenders Mortgage Insurance or a Low Deposit Premium in order to protect themselves.
You can use a savings calculator to find out how long it will take you to reach your goal. If you’re not happy about the time it could take you, you might want to consider a more affordable property or adopt more stringent saving measures. Keep in mind there are some other upfront costs of buying a home outside of the deposit that you’ll need to be able to cover.
Set your savings aside in an account so you can maximise your interest earnings and reduce your temptation to spend. You might even want to consider a term deposit account, which locks away your money for a set period of time while earning you some interest.
5. Look for helping hands
Depending on your circumstances, help may be available for you to reach your deposit saving goal sooner.
The First Home Owner Grant is a state government scheme in which eligible home buyers receive a one-off grant.
Finally, consider whether your parents or other family members may be willing and able to help you out with a one-off financial gift or interest-free loan.
We hope these tips help, happy saving!