One of the biggest hurdles for first-time home buyers is saving for a deposit. Anyone considering stepping into homeownership may feel slightly gloomy when checking in on their slow-to-grow savings.
It is possible to purchase your first home, even as a renter. Here are six sure-fire ways to amplify your bank balance and gain enough money to get you moving out of a rental and into your place in no time!
As with any significant investment, such as buying your first property, some key points to consider are:
- How much money is needed for the deposit?
- What is the total amount you can afford?
- Who will be contributing toward the mortgage?
- Which area do you plan to reside in?
- Are you planning on buying a new build or a fixer-upper?
- Create a home-buying plan
- Exploring optional first-time home buyer loans, grants, and governmental assistance
- Estimating the time it will take to pay off your home
- How to apply for a home loan?
- Do your research on home loan agencies and lending rates
- Speak to accountants, mortgage or financial advisors, as they may have helpful tips
- Have you considered a multigenerational home as an option?
1. Set a budget
Creating a budget will be one of the first steps to realizing your success toward making a major investment such as home buying. It will help you determine where you can save, areas of expenditure you can cut back on, and clarify what you can afford.
Banks are often generous towards individuals who maintain a steady budget as it proves that you can keep the necessary repayments.
Tip: Once your budget is finalized, consider setting up automatic monthly withdrawals that track to your savings account.
2. Reach out
There is no harm in asking for financial support from a relative, often mom or dad. They may be willing to lend a deposit or use their home as security against a loan. For those eager to scrap their current rent costs, moving in with the folks or extended family may provide room to save more money towards a deposit.
Tip: First homes never tend to be dream homes. Accumulating equity is a long-term way of building a property portfolio.
3. Prepare for a financial facelift
People don’t tend to see a way of cutting their spending when they feel like they are already making a considerable effort. Reducing your morning coffees, mid-week drinks, and weekend takeaways will surely perk up your funds. Though challenging to apply, it’ll be smooth sailing once it becomes a habit. Others opt for a more dramatic approach by changing the car they drive, moving closer to work, taking a second job, or pursuing a side hustle.
Tip: Lower any credit card limits or cancel them. Do the same if you have any store cards.
4. Say goodbye to debt
Interest rates are notorious for rising and falling. The same goes for lending restrictions and housing prices. One thing that you can manage is your debts. As mentioned, banks are inclined to lend to those who can prove they have a handle on their expenses.
Tip: Interest rates may decrease if you combine debt through debt consolidation.
5. Know the facts
Plan for a 20 per cent deposit as a rule of thumb. Sometimes, first-time home buyers can get away with paying only a 10 per cent or 5 per cent deposit. There are several websites to help you determine the current mortgage rates.
Tip: Higher interest rates are often attached to these percentages as they are marked as ‘high risk.’
6. Manage your expectations
Keep your eye on the property market. The more you keep up to date with house prices in specific areas, the more you will understand which areas are pricier and which locations will suit your pocket.
Tip: Open a savings account with another bank. This will limit the ability to dip into your savings. Look at accounts that offer clients an incentive for not withdrawing any cash-out.
Reach your home-buying goals
Setting realistic savings goals and uncovering your house-buying criteria will drastically influence your decision and the amount required. Structuring a targeted approach highlighting your savings goals, timeframes, budget, and attainable milestones will place you on the pathway to success and grant you the keys to your castle!