First Home Buyers Saving Guide

Most of us dream of owning our own home but saving for your first home can seem like an enormous task. As a first homebuyer it’s a great idea to set goals for saving that home deposit - but how can you make sure you hit that goal? Is automation the answer? Setting up a budget? Or cutting out those luxury items?

When you buy your first home, you will begin making regular mortgage repayments so the sooner you can develop good money habits the better!

Where should I start?
A good place to start is to simply start! This may mean you’re initially only able to save 5% of your income, however the sooner you can develop the habit of saving the sooner you can increase the percentage of your wage you are able to save each week.

Many first home buyers can get carried away making big plans to draw up strict budgets or try save 40% of their income, only to end up wasting time and delaying their savings plan. The most important aspect of saving is developing the habit, some of our favourite (and most effective) saving secrets are:

Pay Yourself First!
Committing to this secret can see your money working for you, instead of for the nice gentleman who owns your favourite café! You'll inevitably find a way to get through the week, so make sure you pay yourself first to avoid squandering your money on items or activities that offer little long-term value. Remember, every unnecessary purchase you make is making somebody else richer. By paying yourself first you’re ensuring you get richer, while everybody else is left to fight for how you spend the rest!

Set & Forget!
Setting up an automatic transfer into a high-interest savings account will help your savings grow faster as compound interest kicks in. Depending on your bank, bonus interest rates on high-interest accounts may only last for three to four months, so keep tabs on them.

Spend less than you earn!
This may seem like an obvious one, however you’d be surprised the amount of people who don’t understand the concept of living within their means! Living within your means will enable you to build wealth much faster than someone who receives a surprise credit card bill every month.

Identify your motivations for saving!
Identifying your reasons for saving will serve as a reminder of how your savings will add value to your life! This will encourage you to avoid procrastinations and activities that erode your wealth.

You’ve done the hardest part and developed a habit of regularly saving – Have you done the basic maths to get an indication as to how much of a deposit you need to save? Whilst some banks will lend as much as 95% the ideal deposit is 20% - this means you will avoid paying Lenders Mortgage Insurance (don’t worry, we will get into that later in the month).

When figuring out how much of a deposit you nee to save a good place to start is to get a rough idea of your borrowing capacity based on your income. This will allow you to look at what’s on the market in your price range, whilst giving you an indication of what sort of deposit you’ll need. A borrowing calculator is the easiest way to get an indication of your borrowing power. You will be required to input a range of information such as your income, debt level (including any credit card limits) as well as information about your financial commitments.

It is important to remember these calculators are just a guide to your potential borrowing capacity and do not include upfront costs such as stamp duty or future lifestyle changes, such as having children. If you would like to discuss you borrowing capacity in more detail, the friendly team at Addisons are happy to assist.

What are you waiting for? Get saving!

Surround yourself with a team of professionals who can provide you with ongoing support and expertise in securing your financial future.

The Addisons Team are here to help!

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. All loans are subject to lenders terms and conditions – fees, charges and eligibility criteria apply.