Most people have the dream of someday buying property. Not only is the idea of owning your own home appealing, but it can be a great investment as well – one that starts to look very attractive after years of renting.
However, buying property is likely to be the biggest financial commitment you make in your entire life. An important word of advice is to save for your home before you jump in and sign the dotted line. That is because the more money you put down upfront for your deposit, the less you will have to borrow and the less interest you will end up paying.
How much deposit should you pay?
How much deposit should you actually put down? While you could technically get away with only putting down a five per cent deposit (and in fact some lenders might even give you a bond without any deposit) that is not the wisest thing to do. A good rule of thumb is to aim for a 20 per cent deposit on your home.
Get the numbers right
If you are going to save, it helps to know how much you need to save, so that you have a goal to work towards. Use a bond calculator to work out the numbers. Playing around with home loan calculators will really illustrate what a difference having a sizable deposit will make in the long run. You can either begin with the starting point of how much you are able to afford a month and how long a term you want to sign up for, and then calculate what value a home that will get you. Alternatively, if there is a specific price bracket you are aiming for, you can start from there and work out how much you will be paying monthly, tweaking the payment period until you find a number that can work well with your budget.
We are not going to get too deep into the actual mechanics of how you go about saving money, but there is advice here and here. One tip is of course to cut back on frivolous spending, which of requires drawing up a budget. This should be the first thing you actually do when determining to save. Another way to save for your bond is to put away the same amount of money you will eventually be paying on your loan. That will help you get in the rhythm of paying your home off every month, and will also give you a chance to see if you can actually afford the home loan amount you want to apply for, before making a serious commitment.