Saving for a first home
Buying your first home is one of the most exciting times of your life.
It’s also likely to be one of the biggest financial decisions you will ever make and that means there are many things to consider before you put your hand up at an auction or sign on a contract’s dotted line.
First of all, you need a budget. Look at how you are living now, your bills, food, shopping and write it down.
Record everything for a full month so that you have a good idea of all the extras that can crop up along the way.
This makes it easier to see how much money you will have left over at the end of each week that could be saved for a deposit.
2. Pay off credit cards and loans
Remember, budgets only work if you stick to them!
3. Set up a savings account
To keep you on track, it’s a good idea to open a separate bank account, preferably one that earns high interest and allows for automatic transfers and top ups.
Now, the fun starts.
Start thinking about where you want to live and keep an eye on property prices in the area.
Once you’ve narrowed your search down, check your loan to value ratio which means dividing the amount you’ll need to borrow by the purchase price (or appraised value) of the home.
This is what lenders will use to gauge your financial risk.
These days, most lenders will want you to have 20% saved as a deposit so work towards that figure if you can and you’ll avoid paying mortgage insurance.
Lenders will also be impressed if you have a good savings history, so get that budget working for you, pay off your existing bills and loans and start house hunting!
Do you have any other tips for saving for your first home?