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Saving to buy a property while getting slugged for rent? It's hard, but there's a clear, simple set of steps you can take to start putting away cash for a place of your own. It takes discipline, careful planning and a little bit of financial knowledge.
Here's how you can do it.
This consists of two question: how much are you willing to spend on a property, and how big will your deposit be?
Do some research on where you want to buy, what sort of property you're interested in, and be realistic about how much you can afford to pay in monthly home loan repayments. This will help you determine your deposit size and give you a realistic saving target.
Once you have a rough idea of the amount you want to spend on a property you can determine your deposit size. For example, if you wanted to purchase a $750,000 property, the standard 20% deposit would equal $150,000.
But many lenders offer low deposit mortgage options for borrowers who have saved deposits of 10 or 5%. The only downside is you will need to pay lenders mortgage insurance when borrowing more than 80% of a property's value.
Speak to an accountant and mortgage broker during this stage so they can help you understand your borrowing power, which can dictate your savings goal.
Step back and take the time to understand your finances and spending habits. Do the following:
From here, you should work out your budget plan. As a general guide (and depending on your lifestyle needs), you should allocate around 50% of your income on living expenses (such as rent, transport, insurance and utilities), 25% of your income on entertainment (such as dining out, movies and concerts) and roughly 25% should go towards your savings.
Around 15% of the amount you’re saving should go directly towards your deposit fund.
Find more ways to trim your debt; this should be a continuous habit. If you’re still a member of an expensive gym, it might be time to move to a smaller gym. If you’re paying $85 per month on a phone plan, consider downgrading to a cheaper plan.
Open a high interest account that is dedicated to your deposit savings. You can separate your deposit funds from your other accounts and keep track of how much interest you're earning each month. When it comes to applying for a home loan, making regular deposits into a high interest savings account will demonstrate to the lender that you have good financial discipline.
If you can invest in property with a close family member or friend, saving for a deposit becomes much easier, as the amount you need is halved. However, there are other factors to consider before you purchase property with someone else, so make sure you do your homework.
Finding a guarantor for a home loan is another way to relieve some of the pressure of saving up for a home, which can also help you get into the property market sooner.
After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.
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