Women & Finance Series
Achieve your property dream
For many people, buying a home will be the biggest purchase they ever make. It's a big financial decision and there are a number of important things to consider before jumping in. By knowing what's involved upfront, you can help turn your property dream into a reality. And if you're buying a house with someone you're in a relationship with, it could be the catalyst to arrange regular catch ups on your finances to make sure you're both on the same page.
1. Analyse your current spending
First, you'll want to take stock of your current financial situation and spending habits. Gather as much information as you can on what you're currently spending.
2. Set a budget
Almost all good saving plans start with a solid budget. Once you know how much you're spending, try to find areas where you can cut back. Once you know how much you'll be spending each week, decide how much you can start saving. You'll want to save as much as possible, but make sure your budget is achievable – you're likely to get more out of 12 months of moderate savings than 12 days of big savings. If you can, save a similar amount to what you expect your home loan repayments will be – that can help you budget over the longer term. Sacrifices people make when saving for a home loan
• Cutting back on day-to-day spending
• Not taking holidays
• Eating out less often at restaurants/cafes
• Reducing out of home entertainment costs
• Taking lunch to work
• Reducing spend on clothes and shoes
• Delaying the purchase of a vehicle
• Cutting back on personal grooming
3. Get on top of your debts
It can feel hard to think about long-term saving if you're struggling just to keep on top of the debts you already have. You may wish to consider consolidating your debts to help you reduce the stress of multiple debts and interest rates. Speak to your lender about your options before taking any steps to consolidate or refinance your debt.
4. Start saving
Ideally, you'll want to save at least 20% of the purchase price of the property you're interested in as your deposit. Consider opening a savings plan in a high-interest savings account. You could even set up regular payments from your transaction account to your savings account to help grow your deposit even further. Whilst you're saving for your deposit, you might experience some unexpected changes to your income or expenses. Be sure to keep track of your savings and adjust your plan if needed.
"Getting my first mortgage was a bit never racking, but now I love the feeling of having the security of a house behind me" - Clara, aged 27
Understanding the costs of buying a home
Once you have your deposit ready and you're in a position to make an offer on a property, there are some other upfront costs to keep in mind. You will want to be financially prepared so you can act quickly the moment you find your dream place.
Taxes and government fees
Stamp duty is likely to be your biggest cost outside of the deposit and mortgage. It's a state government tax based on the purchase price of your property. You'll also need to pay a fee for the registration of your property's title to the Land Titles Office in your state or territory.
Building and pest inspections should be done before you exchange contracts. You want to be sure that the property is structurally sound and isn't housing termites or any other pests. Even new properties can have a problem that only a professional will be able to uncover.
Mortgage insurance is an additional fee that lenders ask you to pay if you borrow more than 80% of the loan amount. It protects the lender against any loss if you default on your loan and they sell your home for less than the outstanding loan amount. It doesn't cover you for any financial loss, but it does help you purchase a home with a lower deposit. As a home owner you may need some other forms of home insurance to protect your home and contents against fire, flood, theft and more. Conduct an online search or speak to your current insurance provider to get a quote for your needs.
A solicitor or conveyancer can provide you with a quote which will include the transfer of title, property and title searches and contract reviews.
Once the deal is done and the keys are yours, there will be some costs involved either to move in or set the property up for new tenants. If it's the former, you may need to get removalists to help you.
Ongoing property costs
Make sure to budget for the connection of utilities such as electricity, water, gas and internet. There will also be council rates and potentially strata fees and taxes to cover. You should also set some funds aside for ongoing property maintenance.
Home loan costs
Paying off your home loan doesn't just involve making weekly, fortnightly or monthly repayments – there will also be rates and fees that come with the loan.
How can I prepare for a home loan?
- Find an online calculator to get an idea of how much money you can borrow.
- Try to reduce your level of non-deductible debt, such as credit card debt or personal loans
- Check your credit rating. To find out what your credit rating is, you can request a free credit file at www.mycreditfile.com.au
- Create a budget to work out how much you could save each week. If you can, save a similar amount to what you expect your home loan repayments will be.
- Consider starting a savings plan in a high-interest savings account
- Think about your current income and how that might change in the future
- Explore different home loan options to figure out which types of loans and features are best for your situation
- Consider life insurance options such as income protection, trauma, life and TPD insurance to protect against the risk of losing your income or help meet the additional expenses of a serious illness or injury.
We're here to help
If you have a goal to buy your own property speak to our team about how we can help you achieve it. We will work with you to put a plan in place to tick off the spending, budget, debt reduction and saving steps and help you understand the costs and impact of these on your financial situation so you feel confident that you can afford to turn your property dream into a reality.