Saving for a house
There are two important things you need to think about when saving for big purchases like your first home. To get onto the property ladder, you need to:
a) get your head in the game – that’s about changing or refocusing your money mindset
b) do your homework – this is so you fully understand how the house-buying process works and how much it will really cost.
Money Mindset
Your money mindset is how you think and what you believe about money. It influences how you save, spend, and manage your debt. It’s what you believe is true about money, and it can be positive or limiting.
Examples of a positive money mindset are:
feeling completely at ease about staying in to save money when the gang is going out clubbing;
charging a premium hourly rate because what you know what you offer is different to others in your industry.
Examples of a limiting (negative) mindset are:
thinking that you’re not good enough to grow your income past a certain point
convincing yourself to live in the moment and spending money on the latest gadget or going out with the gang every weekend.
If you have a limiting money mindset, you’ll want to change it so you can reach your saving goals for a house deposit.
There are lots of online resources available about changing your money mindset including articles, podcasts, blogs and more. If you’re starting on your saving journey for a house, first spend some time working on your money mindset.
If it needs changing, experts suggest writing down how you think about money now. Ask yourself, ‘what are my money stories?’ then change those stories or find one that serves you better.
Taking the first step into home ownership
Saving a deposit for a house especially if it’s your first, usually means being prepared for a longer journey to reach your savings target. To set a savings target, you’ll need to know what price range you hope to buy in and understand what percentage of this price will be required for a deposit. Of course the balance is how much you’ll need to borrow for the mortgage.
Find a trusted advisor early - this might be your lawyer, a registered mortgage broker or financial advisor. They will be able to help assess your situation and advise on the process and requirements of buying a home.
The greater your deposit and the more you can pay back over a shorter period of time, the less interest you will pay and the quicker your equity in the property will grow.
If you already own a home, you can use the equity in this property to go towards your next. You’ll need to get a valuation or have an idea of how your existing home is worth to include in your calculations for buying your next property.
Remember, there are other costs to take into account when buying a house. These may include legal fees, land and building reports, council fees and moving costs. Ongoing costs will include insurance, council charges, repairs and maintenance fees.
Tips for saving your deposit
Make sure you’ve done a budget and worked out how much you’ll be able to put towards your deposit every time you get paid. When all your bills have been taken care of, make sure the surplus goes towards the deposit and not on unnecessary purchases – this is where your money mindset comes in.
Once you’ve got your budget sorted, you can estimate how long it will take you to reach your savings goal.
If you’re putting money into a savings account, make sure it’s earning the highest interest and charging the lowest fees.
If you’re considering using investments to grow your money for a deposit on a house, make sure you’re aware of the risks and that you’ve got the ability to survive any fluctuations in the market over the investment period.
Use an investor profiler tool (plenty online) to help gauge your attitude towards risk.
Applying for a mortgage
Lending rules and the types of mortgages available will vary depending on where you live, but in all instances, you’ll be required to provide proof of your identity, proof that you have the deposit, and proof that you can service the loan (income).
As always, doing your homework and getting good advice at the outset are vital to making informed decisions when buying a house.
For most, a house is the biggest cost and greatest asset you will take on in a lifetime. The key steps to buying a house are:
1. work on a positive money mindset
2. set a budget and goals, seek professional advice and support
3. list your ‘must have’ criteria and start searching for a property, but be prepared to compromise
4. when you find a property you like, gather all the information about it
5. if it stacks up and your finances are in order, make an offer
6. make sure you know what is expected pre-settlement and on settlement day
Enjoy living in your new home, but remember if circumstances change and repaying the mortgage becomes a struggle, there is help available and the sooner you reach out for it the better.