Saving up for your first home can be a daunting and trying experience, but there are ways you can get the keys quicker;Saving your hard-earned dollars; reducing your spending and eliminating debts. That means everything from credit cards to fast loans and cash loans –should be paid off. Knowing what you can afford and planning for the future will help you avoid property pain in the years to come.
Know your limits
It’s important for first home buyers to be realistic. That means don’t set your expectations too high, because you really are starting at the bottom rung of the property ladder. Whether you are building a new home or buying an established property, it is vital that you be honest with how high you can set your sights. It’s highly unlikely that you are going to be able to afford a flashy house in one of the most exclusive suburbs. But it doesn’t mean that you are locked into buying a ramshackle home in the city’s dodgiest neighbourhood either.
Seek out advice from a mortgage broker or financial planner who will be able to advise of your borrowing power. Speak to family and friends who have recently bought and use the internet to look at property prices, interest rates and other information. Knowledge will give you a greater understanding and more confidence when it comes to making a decision and will help prevent you from overextending yourself.
Disciplined spending and saving
Once you have discovered your limits and exactly what you need to get into your first home, it’s time to tighten the financial belt buckles. The bigger the deposit you are able to save, the less money you need to borrow and the greater your purchasing power. Start with a home budget where you work out how much money you need to live on each week, taking into account such things as rent, food and petrol. Eliminate any luxury items and funnel all the extra cash into a high interest savings account. You will need to make some sacrifices but it will be worth it in the long run. Also eliminate as many of your debts as soon as possible. Credit cards especially can eat into your income so get rid of any debts sooner rather than later to help unlock savings power.
Plan for the future
The biggest mistake first homeowners make is that they fail to plan for the future. There is no point being able to ‘just’ afford your first home if one year down the track interest rates have risen and you now can’t afford your mortgage repayments. You need to factor in things like increasing interest rates, the rising cost of living and job prospects.
There are also life events to consider, such as starting a family. How will you make the repayments if you only have one income? Most importantly, continue the saving and good spending habits you stuck too when saving up for your home, once you move in. These habits will ensure you are never short of cash, should rates increase or you need the money for an emergency.
