If you’re thinking about buying a home, it’s likely that you’re going to need a loan. To qualify for one, a banking institution or lender will need to have a substantial amount of savings as proof that you’re capable of paying it back – which usually involves savings of at least 5% to 10% of the property value. While everyone has their own ways of saving money, we thought we’d compile a list of the fees involved with buying a home, and ways you can start saving for a house deposit.
Saving for a house deposit #1: Work out how much you need to save
On top of a deposit, you’ll have to factor in stamp duty and conveyancing fees which can end up costing anything from $1,000 to $1,500. If you don’t have at least 20% of the deposit saved, you can expect to pay Lender’s Mortgage Insurance (LMI) on top of your deposit. LMI is required when you’re borrowing 80% or more of a property’s value and can be as high as 5% of the property’s value depending on how much you’re borrowing.
When it comes to saving for a home loan deposit, there are several costs involved:
- Mortgage stamp duty: This is a government fee that’s calculated based on the amount you borrow.
- Purchase stamp duty: Stamp duty is one of the most expensive costs associated with buying a home and differs from state to state. Some states may waive the stamp duty rate for first home buyers entirely.
- Registration fees: This is a small fee for registering the change of name on the property title and the new mortgage on the title.
- Lender fees: depending on what lender you go to, you can expect to pay up to $850 in lending fees.
Saving for a house deposit and need a home loan broker? Oak Tree Finance home loans Gold Coast and Australia wide offer home loan services free of change.
Saving to buy a house #2: Analyse your spending habits
Regardless of whether you’re a top earner or not, it’s worth looking at your spending habits to see if there’s anything that needs cutting back on. This might involve making a few sacrifices such as eating out less or curbing an online shopping habit. If you bank with the big four, you’ll be able to track your spending habits with the help of one of their apps. These apps break down your spending habit into categories and will report your most common spending area at the end of each calendar month.
Saving to buy a house #3: Set a budget
Once you’ve had an in depth look at your spending habits, it’s time to set a budget. This is dependent on your desired time frame of achievement, as shorter time frames will involve tighter number crunching. It’s recommended you create a separate savings account from your normal bank account and automate your account to transfer money into savings on a weekly or bi monthly basis. A lot of banks offer goal savings accounts where you can earn interest on your savings if you deposit money at least once a month and don’t withdraw from the account.
Best way to save for a house deposit #4: Get on top of your debts
When it comes to applying for a loan, a bank or lender needs to see that you’re both capable of saving money and reliable when it comes to payments. Having any unpaid debt or outstanding fees is a major red flag to banks – even if it’s something as small as an unpaid phone bill.
Saving for a house deposit #5: First Home Owner Grant
If you plan on building a home instead of buying one or buying a new property, a First Home Owner Grant may be used as a deposit. It’s unlikely you’ll be able to use it on its own, as it’s not enough genuine savings proof for lenders. However, it is possible to use it in conjunction with savings, which may help you pay for some of the loan costs or get over the 80% deposit threshold. If you don’t have enough savings, you can ask a parent to act as a guarantor on your loan.
We hope we’ve given you some good tips and tricks to saving for a home loan deposit. If you’d like some more home loan advice on the best way to save for a house deposit, get in touch with Oak Tree Finances – a mortgage broker Gold Coast homeowners (and beyond) have already trusted with their mortgages many times – for guidance today.