4 things you’ll need to buy a home
Ready to buy your first home? That's super exciting...and a little daunting. Getting your first loan for such a major investment is kind of a big deal! To ensure the road to buying your first home is a happy and confident one, it really does pay to make sure you have the financial side of things squared away. Here's four things you'll need before you can get your hands on the keys to your own place.
1. A deposit
Most banks require a deposit of at least 5% of the purchase price of the house – often more. Getting together a deposit shows the bank you have the ability to be great with your money, which is important when you have to make regular repayments. The size of your deposit will influence how much you borrow and what house you’re able to buy. A larger deposit might also help you avoid having to pay mortgage insurance on your loan – and save money in the long run. And as a first home buyer, don’t forget to look into whether you’re eligible for the Government’s First Home Owners Grant
. It could go a long way to getting you into your home sooner (or a bigger one)!
2. A regular savings habit
Before you apply for your home loan, you’ll need to show you have the ability to put money aside each month over an extended period. Getting into a savings habit will also help you understand your spending limits while paying off a house and will help you feel more positive about your future with a mortgage.
Banks will examine how much you can realistically afford to take on. A home loan is a big commitment, so they want to be sure you’re going to be able to pay it back. A regular savings habit will win you brownie points.
3. An idea of your borrowing capacity and what you’d be comfortable with
Heard the saying about living a champagne life on a beer budget? Buying a house is a bit the same. There’s little point checking out multi-million dollar mansions if the banks will only lend you enough to buy something a little more modest. Talk to a bank or jump on a loan calculator to find out an estimate of what you will be able to borrow. Check out our Borrowing Power Calculator
It can help to work out how much you will need to regularly repay by using a home loan repayments calculator. One that helps you estimate the cost of your mortgage, including stamp duty, rates, insurance, maintenance, like the Heritage Repayment Calculator
is brilliant. And back to point 2, also consider how much you are saving now. This will allow you to make a decision on how much you are comfortable on borrowing and ultimately, paying back. You can also check out what the repayments will be like for loans of different amounts.
4. Additional savings
Life throws curve balls at all of us. Just when things are going well, the unexpected can happen – your hot water system goes on the blink, or your car breaks down and needs major repairs. A small stash of additional savings can act as a buffer when unexpected costs crop up. Being prepared will help you feel more positive that you keep on track with your home ownership goals and still enjoy life now. You don’t want to max yourself out by putting all your savings into a deposit and making repayments that leave nothing over at the end of each pay cheque.
For more information on buying your first home, check out free Little eBook for First Home Buyers.
If you are ready to take the next step, you can also view and compare our home loans here.