How to set your first-home buyer budget
If you are a first time home buyer, your budget will be based on how much money you can borrow, so it’s wise to speak to your bank, a lender or a Bond originator like Secubond at the beginning of your home-buying journey.
Even if you don’t have a lot of money saved, they will be able to advise you on how much you will need for a deposit for the kind of properties you’re interested in, giving you a goal to aim at.
Lenders can also help you realign your expectations, as your optimal suburb or property type might be more costly than you can manage as a first time home buyer.
How much can you borrow?
In spite of the fact that banks will disclose to you the maximum amount you can borrow, this doesn’t necessarily mean you should borrow up to your limit because ongoing mortgage repayments are higher for bigger loans.
Lenders calculate a maximum loan amount based on your income, expenses, assets, savings and credit history.
Compare your after-tax income with your estimated ownership costs, as well as general household expenses, for example, groceries, bills, transport, schooling, and leisure.
If there is only a small amount left for non-essential purchases like eating out or holidays, you might want to consider taking out a smaller loan.
On the other hand, think about whether you can reduce your expenses and live more frugally as a homeowner until your income rises.
It is wise to “stress test” your finances before committing to a large loan. Ask your bank what your repayments would be if interest rates would rise, and calculate how much money you would need to have set aside to make your loan repayments for a few months if you lost your job.
Being prepared for the worst will guarantee that you land securely on your feet if or when it happens.
How much do you need for a deposit?
The deposit is the amount of money you contribute from your savings towards the purchase.
Buying with a larger deposit enables you to take out a smaller loan with smaller repayments, and you’ll generally get a better interest rate. A bigger deposit also means you’ll start your home-ownership journey with more value, which is important when the time comes to upgrade further down the track.
How you can save faster
The first thing you need is a goal. Once you have determined how much you’ll need for a deposit, you can start focussing on your goal.
Saving a deposit for a property has never been simple and requires discipline, usually at a time when you’re finally earning a decent salary and have more money to spend.
Transferring money to a high-interest savings account that is separate from your daily account, will make it harder for you to access your money easily, which means, you won’t be as tempted to take it back out again.
Having a set portion of your salary paid into this account gives you a clear idea of how much you are saving, and it lessens your temptation to withdraw.
Also, consider ways you can expand your salary to save faster. That might mean asking for a promotion at work, taking on extra hours or even selling some of your unwanted items.
Pen down a list of all your small monthly expenses, for example; eating out, takeaway drinks, clubbing, and general entertainment. Cutting back on spending here can save you hundreds a month.
You won’t believe how much you actually spend on nonessential stuff until you start penning down what comes in and what goes out.
Now that you know how to set your first home buyer budget, it’s time to go out and get the most home for your money! All you need is to put your trust in a Bond Originator like Secubond and make use of their fantastic services.