For the average-income earning Australian couple, it takes approximately five years to save for a down-payment in one of our capital cities. Diligently managing expenses for this amount of time requires extensive and well-researched planning. Successful budgeting is a tricky skill to hone and requires commitment, especially for first home buyers. Here is our guide to the process.
Speak To The Experts
Most first home buyers will need assistance with financing. In this case, it pays to get professional help up-front. Even if you are at the beginning of the home-buying process, a bank or lender will be able to advise you on your borrowing capacity, and how much you will need to save for a down-payment.
Know Your Property Criteria
Once you have an idea of your borrowing-power, ‘pre-shopping’ is a fantastic way to finalise your budgetary goals. This process involves researching the relevant listings in your ideal area. ‘Pre-shopping’ will help give you a sense of the cost of homes in your desired suburb and will inform how much you need to begin saving. It will also give you a better idea of your potential mortgage repayments long-term.
Create A Savings Plan
Once you have a clear understanding of the amount that you will need to borrow and deposit, it is time to reassess your monthly expenses accordingly. While your mortgage should never be a source of financial stress, it will often require compromising on some weekly spending and creating strict financial boundaries. This means sweating the small stuff; consider how often you eat out per-week and how many visits you make to the pub or the movies. Keep a financial diary and, at the end of each month, review what spending can be slashed. Small cut-backs can accumulate into big savings.
The First Home Super Savings Scheme
The First Home Super Savings Scheme is a useful resource for first home buyers. This scheme allows prospective buyers to save for a home inside their superannuation fund. You can apply to have a maximum of $30,000 in voluntary super contributions released under the scheme. This can contribute directly towards a house deposit. If you are considering saving for a first house, it is worthwhile making small, voluntary super contributions.
Planning Your Budget
Once you have assessed your monthly expenses, it is time to start rationalising your cashflow into a manageable, long-term budget. Budgets are relative and circumstantial; it might take some experimentation to determine what works for you on a month-to-month basis. It is a good idea to trial-run your mortgage repayments for six months before committing to a loan. Any savings made can contribute to your down-payment. A successful budget will ensure that your monthly income is surplus to projected expenses. Every bank has an online budgeting tool that can help you arrange your finances.
When budgeting for a home, it is also important to consider your future circumstances and monetary concerns. You could be tethered to a mortgage for decades. Will you still be able to meet the repayments with a growing family? How about a change in job-status? Budget in a monthly ‘buffer’; a savings pool that you can dip into when faced with an unexpected expense.
Tip: How are you managing your current rental expenses? Being able to comfortably make rent each month is a good indication of a suitable monthly mortgage repayment. Substituting your rental expenses for a mortgage will minimise lifestyle compromises!
Managing Your Budget Day-To-Day
It helps to establish a few savings accounts that remain untouched and are designated to a certain budgetary purpose. These can interact automatically to ensure that money is diverted into the appropriate (untouchable) accounts, where it can then be accessed via direct debit. For example, a portion of your income may be diverted into a ‘house’ savings account, or an account dedicated to mortgage repayment. This is a useful way of structuring your budget and ensuring that the allocated funds remain where they need to be. Each month you should aim to be in a stronger financial position than the month prior.
Are you a first home buyer thinking of building your own home? With a little planning and the right advice, the task of acquiring a home loan and building doesn’t have to be stressful! Book a call with our team of new home advisors or call 1800 184 284 to get started today!
Let us do the legwork for you.
- We’ll ask the right questions to better understand your needs
- We’ll create a recommended shortlist ideally matched to you
- We’ll answer specific questions or concerns related to home building, land purchasing or financing
1800 184 284
