Did you know that March saw Australian home values record their fastest monthly growth in over 3 decades? A nationwide increase of 2.8% resulted in the Reserve Bank of Australia deciding on Tuesday April 6, that our official interest rate should remain at 0.10%.
In March, Perth dwelling values increased by 1.8%, for a quarterly growth figure of 5.0%. The median price for a house in Perth is now $505,850 which means it’s now more important than ever to make sure you’re financially ready to buy if you’re a first home buyer. Below we discuss some methods on how to save money for a house.
Actionable tips for buying your first home
1. Figuring out how much you need to save for a deposit
The majority of lenders will only allow you to take out a mortgage if you’ve been able to save 5% of the purchase price of the property. For example, if your house and land package is $520,000, you’ll need to save a deposit of $26,000.
We feel that this advice is crucial when figuring out how to save money for a house.
Furthermore, if you’re able to save 20%, lenders will waive their risk fee, meaning that you will save on LMI (Lender’s Mortgage Insurance).
Once you’ve figured out your deposit amount, this gives you a goal to work towards. Goals are best achieved when you adhere to a plan, which brings us to our next point.
2. Plan and adhere to a budget
A monthly budget is crucially important for achieving your savings goals. After all, a goal without a plan is just a wish. Get proactive with achieving your goals and check out moneysmart.gov.au for a budget template that shows you where your money is going and how you can budget better.
A little bit of short term sacrifice will help you achieve your savings goals. Making coffees and meals at home instead of relying on the local café or UberEats can make a difference to your monthly savings target. Share a Netflix account with a friend or family member. Substitute your gym membership for pushups, situps and a jog around your neighbourhood.
How to save money for a house / deposit; Embrace the 50-30-20 rule:
- 50% of your income covers your must haves such as rent, bills, groceries and insurance
- 30% covers your wants such as new clothes, toys for the kids, travel, event tickets, entertainment with friends and family
- 20% covers your savings and is a steady amount you can contribute each month without sacrificing too much in your life
3. Moonlighting
You may need to check your employment contract for conflict of interest clauses, but a little bit of extra work after hours or on the weekend can really help boost your savings.
Umpiring local sport, lifeguard duty, live chat support agent, teaching a musical instrument, babysitting, even walking dogs can be a source of extra income and help in achieving your deposit target sooner rather than later. If you’re asking yourself how to save money for a house, moonlighting could be of assistance.
4. Clear your debts and maintain a healthy credit rating
Paying off your debts is important as potential lenders will take this into account when approving your loan. Furthermore, reducing your limit on the credit cards you own will also play in your favour. Not only will reducing your credit limit be deemed as less of a risk by lenders, it may also assist if you’re asking yourself how to save money for a house or deposit.
Your financial track record is important and making repayments on-time is crucial to upholding a strong credit rating. There are credit agencies that collect information about your debts and credit history, then award a score between 0 – 1,000 based on your habits. Most scores range from 300 to 850. If you need to check yours, try ClearScore.
5. Get a true understanding of the costs
Below is a rough guide to all the costs that come into play when buying an established property. This will help you get a better idea of how to save money for a house. Some of these costs can be included in your mortgage. Let’s use the $520,000 property from the example above in point 1 as a guide:
- Property value: $520,000
- Mosaic Settlement’s fee: allow $1,500
- Stamp duty: usually $18,700
- $17,271 for a First Home Buyer
- Furthermore, First Home Buyers pay $0 stamp duty for a property valued under $430,000 but a reduced rate for a property priced between $430,000 and $530,000
- Mortgage registration fee: $178.20
- Transfer fee: $288.20
- Loan application fee: $500 – $600
- LMI with 10% deposit of $52,000 (LVR 90): $8,200 – $9,500
- Building and pest inspection: $600
- Also council and utility rates: allow $1,000-$2,000 for Water Rates and Council Rates
- This cost will vary depending the time of the year or the bill cycle your property settlement occurs
Contact Mosaic Settlements today for more guidance on how to save money for a house
Be sure you put your faith in a settlement agent Perth locals can vouch for. Contact our expert conveyancing team for advice on buying a house and to ensure your settlement is in the safest possible hands.
