The comments in the news are enough to make you think saving a deposit for your first home is mission impossible. Not true!

So, rather than just encouraging you to stop buying #SmashedAvo breakfasts to save your deposit, we’ve put together some practical tips to get your savings account over the finish line. We may even be able to tell you about some recent changes to the first home owner grant and stamp duty that could help, depending on where you are looking to buy. With a solid budget, a few lifestyle tweaks and some help from us to determine how much of a deposit you’ll actually need, you could soon be attending open home inspections looking for a fantastic new pad!

Tip #1: Create a budget

Our first tip is to have a savings plan and stick to it. Create a budget, separating your ‘needs’ from your ‘wants’, and work out how much you can put aside every week to reach your goal. Remember, lenders will want to see a solid savings history, and depending on the type of property you intend to buy, this could be just as important as the size of your deposit.

It’s important to include ‘fun’ money in your budget, but if you’re serious about saving up a deposit you may have to consider cutting back on extras. There are plenty of great tools to help you get started, such as the TrackMySPEND app, whereby you can nominate a spending limit and track your progress, or the Pocketbook app, which connects to your bank and automatically tracks your income and expenses. Once you get going, you’ll find it very satisfying to watch your nest-egg grow. Chat to us and we’ll help you set up an effective budget.

Tip #2: Change your spending habits

Try to be proactive about saving. For example, take lunch to work rather than eating out, or challenge yourself to stay fit by running or exercising at home rather than spending money on a gym membership. Need entertainment? Borrow books or DVDs from your local library or have friends over for a pot luck dinner. Need clothes? Organise a clothes swap party or find a bargain at the nearest op shop. Need tools? Ask your parents if you can borrow theirs. Shopping around can also help you save, so whether you’re buying groceries or electricity, compare prices and make a point of finding the cheapest option – it can be fun!

Tip #3: Become a “super” saver

As of July 1, aspiring first-home buyers will be able to make up to $15,000 of voluntary contributions into super each year, or $30,000 in total, to put towards a deposit and benefit from the tax breaks. Talk to us and we’ll explain the changes.

If this is not the option for you, there are other ways to maximise your savings. You could open a term deposit or a high-interest savings account that rewards you for depositing money and not taking it out. You may even consider investing in shares to grow your savings. It’s a good idea to talk to a financial planner about how you can make your money work harder for you. Chat to us and we can refer you to a reliable professional.

Tip #4: Speak to us now, even if you don’t think you’re ready to buy

We can help you to create a budget and explain any financial assistance that’s available. Recently, there have been changes to stamp duty concessions and exemptions for first-home owners in some states, as well as to the First Home Owner Grant, so check in with us to see what you’re entitled to. Maybe you won’t need the 20% deposit – ask us about other options like paying Lenders’ Mortgage Insurance to secure a home loan with a smaller deposit, or asking a family member to use their equity as security for your loan and go guarantor. We can also explain how to check and tidy up your credit report, which lenders will want to see when assessing your home loan application.

Tip #5: Consider property options that may require a smaller deposit

Your first home may not necessarily be like your mum and dad’s place – most people have to start small and work their way up the property ladder and that’s OK. To break into the market, you may have to consider less expensive properties such as apartments or renovators’ dreams. How much deposit you’ll need will depend on what you want to buy and your financial circumstances, so talk to us and we’ll help you review all of your options.

As your mortgage broker, we can help you with everything from saving the deposit, to finding a suitable loan, given your personal financial circumstances and goals. We may even be able to help you find the right area and property. Please give us a call today – we’d love to hear from you. And if you do find yourself feeling disheartened, remember the words of the great Nelson Mandela, “It always seems impossible until it’s done.”5 Tips for saving a deposit for your first home

You’ve budgeted hard, given up loads of smashed avocado brekkies, saved your deposit and are ready to buy your first home. High five!

There’s nothing quite like finally getting a foothold on the property ladder and moving into your very own pad, but it does require planning and research. With our help, you’ll soon be doing a victory dance and posting that exciting Facebook post of you in front of a shiny ‘SOLD’ sign. Here are our quick tips for buying your first home.

1) Talk to us about how much you can borrow

Your home ownership journey begins with a chat with your mortgage broker! There’s no point wasting your life inspecting properties that are outside your price range. We’ll help you determine your borrowing capacity, set your buying budget and explain about applying for the First Home Owner Grant and making the most of any other exemptions and savings you may be able to obtain to help you get started.

The amount you can borrow will depend on the size of your deposit, your savings history, income, expenses and credit history. It’s a good idea to save 20 per cent of the purchase price, plus the other costs associated with buying property like stamp duty, legal fees and building and pest inspections.

You may still be able to buy now even if you don’t have a 20% deposit, so talk to us about your plans. If you don’t have a 20% deposit, you may still be able to get a home loan, but you will have to pay Lender’s Mortgage Insurance (LMI) which protects the lender against any shortfall if you default on your loan and it has to be sold to repay your debt. Sometimes it’s worth paying LMI if it means you can get on the property ladder sooner, so talk to us and we’ll help you decide if its best to buy now or wait until you’ve saved more.

2) Get on the property ladder sooner rather than later

In most cases, it’s a good thing is to jump aboard the real estate train pronto! The sooner you stop wasting money on rent and start making capital gains on your property, the better. But getting into the market sooner rather than later might mean compromising. You might not be able to afford your dream home immediately, but the property you buy may be a stepping stone to greater things. If your desired location is too costly, you may have to consider buying in another suburb, purchasing an apartment or a more modest home, or finding a “renovator’s dream”. Remember, from little things big things grow and you can always trade up in future.

3) Learn how to research the right property to buy

Once you know your price range, you can use it to find prospective properties to inspect and identify areas that you can afford. Location is key, but you also have to factor in affordability. Research the areas and properties you are interested in very thoroughly. Consider the capital growth potential, rental yields and proximity to schools, transport and other amenities – this can be confusing, so if you need help just ask us.

When you find a home you like, research it by arranging building and pest inspections to ensure the property is structurally sound and free of unwanted guests. If the property is going to auction, you will need to do this beforehand.

Buying your first home is exciting, but it’s important to seek professional advice. As your mortgage and finance specialist, our services are free and we’re happy to help you in any way we can, even if you’re not quite ready to buy right now. We’ll help you with your budget and deposit saving plan, guide you through the buying process, ensure your financial goals are taken into consideration, and provide ongoing support in the future. Save yourself time, money and stress by getting in touch with us today!3 Top Tips for Buying Your First Home

Over the past few months, there has been a lot of chatter in the media about APRA tightening controls on lending for investment property purchases. And as property investment is one of Australia’s most popular ways to build wealth for the future, it has understandably raised a lot of questions from our clients about how this will change the game for those currently looking to invest. But what is APRA actually doing and why? How will it affect your capacity to get an investment property loan if you’re looking to buy this spring?

What is APRA? 
First of all, we should explain APRA and the role it plays in the finance industry. APRA is the Australian Prudential Regulatory Authority and it acts as Australia’s finance industry watchdog. Their role is to regulate the behaviour of lenders, banks, credit unions, building societies, general insurance companies, private health insurance agencies and the superannuation industry. Their mission is to establish and enforce standards and practices to ensure that our financial industry remains stable, efficient and competitive.

APRA is concerned that the property market is becoming overheated, particularly in Sydney. This follows home price growth of over 18% in the Sydney market over the past year. APRA is concerned that an overheated market may be subject to rapid price adjustments and this could not only destabilize our entire financial industry, but prove to be extremely risky for the average residential property owner or investor.

What restrictions has APRA imposed?
APRA is primarily concerned about the rate at which the big four banks have been issuing property investment loans. In order to cut it back, they have done two things:

  • Increased the capital reserves the big banks are required to hold for their exposure to residential property mortgages; and
  • Enforced their requirement that the bank’s investment lending does not grow by more than 10% annually.

The result is that the big four banks have raised interest rates on property investment loans. They have also tightened their lending criteria, so that property investors may now require a larger deposit and must be in a financial position to meet their repayments in the event of significant interest rate rises in future. They are also discouraging interest only property investment loans as these are considered more risky in a property market that may be subject to rapid declines in home values.

How will this affect you if you’re looking to invest now?
First of all, let’s look at interest rates on property investment loans. While it’s true that some banks have raised interest rates on property investment loans, these rate rises only represent a 20 – 50 basis point rise, meaning that the increased interest rate on property investment loans is only a half a percent or so higher on average than most owner-occupier loans. When you take into consideration that interest rates were down to all-time historical lows anyway, this will not prove to be much of a deterrent to those of you looking to invest in property this spring.

Additionally, not all of the lenders are at risk of exceeding APRA’s requirement that investment lending does not grow by more than 10% annually. This means that many of the smaller lenders have not raised their interest rates on property investment loans very much – in fact, some of them have not raised their rates at all.

This is where it really pays to have a good mortgage broker on your team. If you are planning to purchase an investment property this spring then talk to us and we will shop around to find you the most advantageous rate!

What about the tighter lending criteria – how will this affect you?
If you are about to purchase an investment property, then the bank’s tightening of lending criteria may have some effect. It is likely that the amount you can borrow has recently been reduced by 10-15% for the same level of income. Additionally, the big four banks will most likely require a 20% deposit, whereas in the past they would have accepted 10%. (Some smaller lenders are still approving investment property loans with a 10% deposit, so if necessary ask us to shop around.)

The result is that your purchasing power may be reduced and if you want to invest this spring, you may have to look at purchasing a less expensive property. For most property investors, this will prove to be only a minor stumbling block – after all a 15% reduction in your buying power isn’t very much. You may have to work a little bit harder to find a suitable investment, but at the end of the day you will most likely be able to find something that suits your budget.

Good advice is now more valuable than ever
The fact is, it’s more important than ever to be able to get good advice about your loan structuring and a mortgage broker who is able to shop around amongst a wider variety of lenders to get you the best rate the market has to offer.

We’re happy to say that’s our job! Since the APRA restrictions have come into play, we have been able to help several clients find great financing options for their investment property purchases and lower rates for those looking to refinance. We’re confident that we can help you too. If you’re in the market to purchase a property this spring, then give us a call. We’re here to help.


Copyright 2016