Saving for your first home can feel like an enormous, almost insurmountable task. However, there are ways that you can begin being mindful about what you need – and what you need to save – in order to purchase your first home. So, what kinds of questions might you want answers to? And what kinds of things should you keep in mind that you haven’t even considered yet when it comes to being able to purchase your first home?
Keep reading to find out.
How much can I borrow?
This is a good place to start when you are beginning to think about saving to buy your first home. Figuring out how much you can borrow requires you to responsibly and honestly assess what you can safely manage to repay over the length of your mortgage. The price of your mortgage not only depends on the price of your house, it depends on the length of your mortgage, the interest rate that you got when you took out your mortgage. It also depends on whether or not you elect to take out a fixed rate mortgage or an adjusted rate mortgage, which can get more expensive over time.
To begin this process, simply find a trusted loan and mortgage calculator online to determine how much you can borrow. The best calculators will take things into account like income, living expenses, your credit car limits, the number of dependents you have, and debt.
Once you know how much you can borrow and safely pay back given your current income, you can start to plan and save for homes within your reach. You can also discover that you may simply need to make more money before you can consider buying a home.
Do I need a 20 percent deposit to buy my home?
If you are going to borrow more than 80 percent of the property’s value, you will most like be charged Lenders Mortgage Insurance. It can end up saving you money, but LMI is just another bill that you will have to be responsible for. If you are able, borrowing at least 20 percent is always advised.
What are savings tips that I can use?
This is a big one, especially if you plan on putting down a healthy down payment when you buy your first home. You are going to have to save for not only that, but also for the many expenses that come with making the move. Here are some great tips to keep in mind when trying to save.
- Prepare a budget and stick to it. Avoid spending on non-essential items and impulse purchases. These types of payments may seem gratifying at the time, but they only work to delay your ultimate dream of buying and owning your very own home.
- Put money towards your home deposit first. Open a separate ban account, ideally a high-earning savings account and set up automatic transfers for all of your and your spouse’s paydays. On top of that, try to make additional injections of cash into your savings account whenever possible, for example after you get a sizable tax refund.
- Pay off your credit cards and any personal loans as best you can. Paying off and eliminating these debts will help you increase your borrowing power and allow you to get a mortgage a lower interest rate.
- Record and analyze your expenditure over a month to reveal opportunities for savings. Write down everything, including miscellaneous items such as gas, meals out, entertainment, and more. These everyday extras can add up to serious money overtime. For example, a coffee a day at Starbucks can cost you upwards of $200 a month! That’s money that you could put towards your savings to your down payment on your first home and can be massively reduced if you make your coffee at home.
- Look around for deals! There are ways that you can save money on necessary expenses if you look around for it. Consider becoming a member of a grocery store where you can buy food and materials in bulk. Try to learn about bundling insurances to save money. There are a lot of things that can help you save money on that can help you save money and put it towards your ability to buy a home.
Do not forget about the extra costs.
This is something that you absolutely have to keep in mind when you are preparing to save to purchase your first home. When it comes to making an offer on a property and moving, there are so many additional costs other than just the down payment that you need to consider. Some are fees such as building inspection fees, pest inspectors, solicitor/conveyance fees, loan application and property valuation fees, and even things like stamp duty.
Moving costs can easily add up as well. Things like furniture removal, cleaning, insurance for your building and your property, electricity and gas bills, telephone and internet, and more. Check online for a breakdown of all the expenses you can expect to have to make in order to purchase a new home and move in.