Buying your first home is an exciting and rewarding experience, but getting there can be hard. First home deposits are nearing or exceeding $100k in main centres. That is making it a considerable challenge for people to get onto the property ladder.
So, what can you do about it?
Should you give up and resign yourself to the thought of renting forevermore?
Put simply... no! You shouldn't give up. Just because it is harder to get onto that first rung of the property ladder does not mean that it is impossible. In fact, it is quite achievable if you change a few things.
So, we have put together our best tips for taking control of your finances to buy your first home.
Take Control Of Your Finances To Buy Your First Home
Change Your Spending Habits
It goes without saying that if you are trying to save for a house, you will need to spend less money on other things. You don’t need to completely give up your social life (or avocado on toast), but every little bit counts. Not only is this important for keeping a bit of extra cash in the bank, it is actually a big part of your home loan approval process.
Yes, banks want to see your bank statements to see what you are spending your money on!
This might seem a bit over-the-top or uncomfortable, but this process is actually for your benefit. Changes made to responsible lending practices in 2015 mean that lenders need to be sure you can meet repayment obligations without it causing you financial hardship.
A handy tip to help keep your spending in check is to allow yourself a certain amount of spending money from each payday, and take it out in cash. Paying in cash instead of using a debit card gives you more immediate visibility of how much you are spending, and how much you have left until next payday!
Watch Your Short Term Debt
Part of the process of checking that you can service a mortgage will involve looking at your short term debt. Anything from credit cards, to vehicle finance, hire purchases, and personal loans for a holiday can hinder your chances of securing a mortgage if your debt repayments are too high.
The better thing to do is to refrain from taking on any short term debts. If you don’t have the funds to pay for something in cash, then set yourself a savings plan to do it. Better yet, try to wait until you have your mortgage all sorted first.
Make And Stick To A Budget
A simple budgeting spreadsheet (or an app if you prefer a more technical approach) is helpful for mapping out your expenses vs. your income. This tells you how much you have left over to set aside, and it might highlight some areas for you that you need to cut back on. For example, if running your car to work each day and paying for parking is costing a lot, maybe taking the bus or train will save you some money. Or, you could try carpooling with a colleague, your partner, or a friend if they live and work near you.
A good budget helps to keep things on track so that when it comes time for a home loan application, your accounts are looking as healthy as possible. You can also find awesome resources online to help with money management skills or budgeting.
Get Your Deposit Together
By setting out a budget and tackling bad spending habits, you are putting yourself in a better position for getting that first home deposit. Your other not-so-secret secret weapon is your KiwiSaver scheme.
Your KiwiSaver savings are automatically deducted from your wages, so it is a great tool for people who otherwise struggle to keep money in their savings accounts. You can apply to withdraw your money to go towards purchasing your first home. Even if you only have a modest amount in there, you might also be eligible for some of the other KiwiSaver benefits, like special grants for first home buyers.
This little bit of extra cash could be what gets you over the line for your deposit.
Talk To A Home Loan Specialist
Home loan or mortgage brokers can help take the stress out of the home buying process. They offer invaluable advice and can find you the best deals - with the lowest interest rates or cash-back opportunities. With access to all the major and second tier lenders in the country, they can also bring a lot more options to the table for you.
Contact the Finance Marshall today to take the hassle out of buying your first home.