To buy a house you first need to save for a deposit but there is more to this! These 7-step guide could take you on the right path and make your planning more manageable.
1. Work out your deposit target
The first step towards getting your own home is saving for the deposit. Having a good habit of saving and budgeting is the best way to get going. But it can be hard knowing exactly how big your deposit should be.
Take a look at the area you hope to buy in, recent sales prices and the average percentage price increase year on year. That will give you a good idea of what you need to aim for. The minimum deposit to take out a Pepper Money Home Loan right now (on some products only) is 5 per cent of the total purchase price of the property. This amount will vary depending on how much you’re borrowing and the type of loan you get. You’ll also need to save money for the fees and charges for getting your loan set up. Ideally you want to aim to save 10 – 20%.
Have a look at the online saving calculator to see what you need to save each month over different timeframes to work out how long it will take you to reach your goal.
2. Start your budget
If you don’t have a monthly budget already then now’s the time to work out exactly where your money’s been going – and where you want it to go. Sounds simple but it is the heavy lifter when it comes to saving up for deposits. It’s only when we see how much gets spent on coffees, drinks or takeaways, that many of us realise we can start to keep some money back each month.
This planner from MoneySmart can help you do your budget. What do you think you can save on each week?
3. Think about ways to earn more money for a while
You are never too old to babysit, or take on an extra job doing something like house cleaning or gardening once a week. Or you can sign up for being available to do household work on Airtasker. It will keep you busy when you might otherwise be spending money and it’ll really help that deposit grow faster. If there are two of you saving – like maybe a friend saving for something they want – work out what you can do as a team. It’ll be more fun and you can help motivate each other.
4. Get credit ready for the lenders
When looking to buy a home, it’s really important that your credit history is in as good a shape as possible. First, pay off any outstanding debts. Clearing your debts plus a history of regular savings in your bank account, combined with a good record of employment, will really help you secure a home loan in the future. It’ll also stop you paying over big sums in interest; credit card debt eats up money, so clear it.
Second, check your credit rating. What is a credit rating? Companies that give credit (like banks, insurance companies and power companies) want to know if you have a good financial track record. Credit agencies collect that information to help those companies make decisions about lending to people. They gather information about your credit history and, on the basis of what they find, they give you a credit score – a number between 0 and 1,000. Most credit scores are between 300 and 850. The higher the score, the better your credit rating is. You can find your score for free online.
Have a look at the report and make sure everything is accurate. If you see any mistakes, now is the time to correct them. If you’ve never applied for credit, you probably won’t have a credit score but most people have a credit history of some sort.
If your credit history looks good by the time it comes to apply for your home loan, you’ll have a better chance of securing it. So in the time between now and when you apply, don’t fall behind on bill payments or add any new debt.
5. Get across the details you need to know
There are lots of small extra expenses and fees that are part and parcel of applying for a home loan. These have the potential to add up, so it's super important to do your research into the details of any offer you look at.
This may include establishment fee, legal fee, monthly administration fee and more. Check out the high level summary of the main fees for Pepper Money home loan products here.
6. Get a feel for the market
Other important things to think about are the average price for where you want to live and home loan interest rates – both of which can change in a year. You could also think about going to some property auctions, without bidding of course, so you can get a feel for how the market is going.
7. Decide if you need expert advice
Expert advice is another potential cost, but there are benefits in getting help. Whether it’s a buyer’s agent, accountant or real estate broker, their knowledge and specialisation could save you money in other areas – not to mention guiding you through some of the more technical aspects of buying a home.
When you’re ready to talk to someone about buying your own home, talk to one of our Pepper Money Lending Specialists. We have the widest range of products in the market – from regular loans [called Prime loans] through to specialist loans for people who need something different – like someone who might have credit history issues or who doesn’t have the usual earnings history.