Looking to enter the property market and worried about how you’re going to secure your first home loan? It’s time to start making your money work for you so you can land that loan.

Qualifying for a home loan isn’t always an easy path. Aggressive interest rates, competition in the market and less than rigorous saving habits can often push people out of the property game completely – but it shouldn’t.

Saving enough money for a sufficient deposit is possible with the right guidance and plenty of diligence.

Knowing your target

If you’ve done your homework, you’ll know that ideally you should have a 20% deposit. You need to also factor in other upfront costs that come with buying a property. Stamp duty, conveyancing, registration fees, building inspections and insurance are all associated costs that will need to be covered.

A mortgage broker will be able to calculate these for you. They will also be able to tell you about any current schemes and grants that you may be eligible for to get you into the housing market sooner, with a much lower deposit than you might think, starting at 2% in certain situations.

Knowing exactly how much of a deposit you are aiming for will give you a sense of purpose and make those sacrifices much easier with a clear goal in mind. 

Lenders Mortgage Insurance

Saving for a deposit can be a huge undertaking, especially as the median house price continues to increase. With Lenders Mortgage Insurance (LMI), borrowers are able to purchase a property with a smaller deposit. You may be able to get a loan with a deposit as little as 5% of the property’s purchase price. There is a premium fee associated with LMI, but it can be paid upfront or over the term of the loan. Paying LMI can be well worth it to get you on the property ladder sooner and stop prices running away from you. 

Budget, budget, budget! 

It goes without saying that creating an airtight budget – and sticking to it – is key when you’re looking to save money for a home loan.

As daunting as it may seem, saving to buy a home is possible if you budget. Filtering a percentage of your salary into a high-interest savings account can be a smart first step and can grow into a sizeable amount more quickly than you think. But whatever you do, avoid dipping into that savings account at all costs.

Assess your debt

Along with mastering a budget, paying off your debts could really help with your borrowing power and free up cashflow to help you save more for your deposit in the long run. 

On the other hand, if you have enough borrowing power with your credit card or car loan in place, you might benefit from keeping your savings to put towards your deposit instead of paying off debt.

Before making this decision you should talk to a broker to see how both options affect your situation. 

Luxuries be gone

‘Work hard now, have fun later’ will become your new mantra when securing a home loan. Being able to save enough money for a deposit means cutting down on life’s unnecessary luxuries. Reducing your dining out, takeaway coffee, $10 sandwiches for lunch and subscription services can save you hundreds and even thousands of dollars.

If you’ve been living under the guise of having a high disposable income, the time to curb your spending is now. Living within your means is about questioning your wants and needs: Do you really need that pricey leather couch or would you prefer to have a house to put it in first?

Saving money for a home loan deposit is one of the biggest and best decisions you’ll make and will certainly pay off in the long run. Making financial sacrifices now will reap very pleasing rewards and potentially set you up for life.  

Talk to us today to help you map out your journey and set a savings goal.

This article provides general information only and may not reflect the publisher’s opinion. None of the authors, the publisher or their employees are liable for any inaccuracies, errors or omissions in the publication or any change to information in the publication. This publication or any part of it may be reproduced only with the publisher’s prior permission. It was prepared without taking into account your objectives, financial situation or needs. Please consult your financial adviser, broker or accountant before acting on information in this publication.