Housing prices have soared in recent years and made it much more difficult to save for deposit on a house. However, it is still possible to purchase your first home if you’re disciplined in your saving habits and utilise the Australian government’s first home buyers’ schemes.
Here are some tips on how to save for your first home deposit:
Take a hard look at your spending.
It can be easy to lose track of your expenses, so try to consolidate them all into one place. Once you have the full picture it’ll be easier to see where you could cut down spending. A good way to cut back on your expenses is to shop around and be flexible when making purchases, whether it be groceries or a TV. Being patient and ignoring any brand bias you might have will ensure you get the best deals.
Set a budget for yourself.
Create a budget that has some room for error. Be honest with yourself about your spending habits and set a realistic budget that you can stick to through good times and bad. Creating a budget that’s too conservative for your lifestyle will only leave you disappointed when you inevitably go over it.
Consolidate your debt.
The less debt you have, the more attractive you and your loan application are to lenders. All kinds of debt will factor in when applying for a loan, so reducing your other debts by as much as possible will ensure you can borrow a higher amount.
Staying on top of your loan repayments, whether it be car financing or credit cards, will not only help you pay less in interest over time, but ensure that your credit score is attractive to lenders. Getting into good habits early will set you up well for your mortgage repayments.
*Enhance Your Savings.
Putting your savings into a high interest-bearing savings account will ensure your money is increasing in value. If your savings timeframe is quite expansive (5+ years) it might even be worth looking into investing some of your savings in some growth assets, like property. Investing could help to keep the value of your savings rising at a similar rate as house prices, making sure you’re not left worse off than where you started.
Let the Government Help You Out:
The Australian government has a few schemes to help Australian first home buyers purchase their first home.
First Home Super Saver Scheme (Federal):
FHSS helps first home buyers save for their house deposit. So long as you plan on living in your home for at least 6 months within the first 12 months of owning it, you can make voluntary concessional or non-concessional contributions to your super fund to save for your home deposit. From July 2022 the maximum releasable amount over all the years that you have been making voluntary contributions is $50,000.
First Home Loan Deposit Scheme (Federal):
This scheme allows first home buyers of new homes to deposit as little as 5% without having to pay lenders’ mortgage insurance on their property purchase. NHFIC guarantees up to 15% of the value of the home to the lender. This only applies to singles with an annual taxable income of less than $125,000 and couples with less than $200,000. There is also a threshold on the property value but that differs for each suburb.
First Home-Owner Grant (NSW):
First home buyers that purchase or build new homes can receive up to $10,000 towards the purchase price of their home, so long as the home and property value do not exceed $750,000.
First Home Buyer Assistance Scheme (NSW):
First home buyers can receive a partial or full stamp duty exemption under this scheme. Properties worth less than $650,000 and new homes worth less than $800,000 can receive a full stamp duty exemption. Existing homes worth between $650,000 and $800,000 and new homes valued between $800,000 and $1,000,000 can apply for confessional transfer duty rate.
To check out the government assistance schemes:
*This is general advice which is non-specific to your specific circumstances. This advice may not be suited to everyone.