Increasingly strict lending rules have made it virtually impossible for first time home buyers to score 100% mortgages. Home buyers are now required to have at least a 5% deposit of the home purchase price, although if you don’t want to pay purchase default insurance, then you’ll need at least 20% for a conventional mortgage.
There are several advantages to saving as much as a deposit as you can muster together before you make your first home purchase. A larger down payment means:
· the amount of your monthly principal and interest payment will be reduced
· the total amount of interest you pay over the life of your mortgage will be less
So if you’re looking for ways to scrape together the cash for your first home loan, consider these tips:
Pay yourself first
The best way to establish and stick to a savings routine is to make sure you pay yourself first. This means before you pay the rent, the electricity bill, or indulge in a personal treat you set aside 10% of your net pay each pay period. If you wait to put 10% of your pay into a savings account at the end of the month, you’ll often find that the money just isn’t there.
Sell old, unwanted items
If you look around there are probably several household items that you no longer use or need – baby clothes, exercise equipment, outdoor furniture, beer fridge - why not sell them for cold hard cash on eBay or craigslist?
Get rid of debt
Sure, it seems odd to clear you debt right before you take on a massive mortgage, but when it comes to securing a home loan, carrying high levels of debt will reduce the overall amount lenders will be willing to offer you for a mortgage. You want to be able to demonstrate to lenders that you have responsibly made repayments on your credit cards. And if you do manage to repay your credit cards in full prior to applying for a loan, you might also consider asking your credit card company to reduce your overall limit as this will also help boost the overall amount lenders will be willing to offer you.
Tighten your belt
OK, so this is hardest tip to follow. Saving for a deposit often means swapping your champagne lifestyle for beer, or beer for water, as the case may be. You don’t have to suck all the fun out of your life, but you should expect to make some sacrifices. While it’s kind of downer to skip nights out, or bring your lunch to work, you can derive some satisfaction from seeing your savings build. Possible areas to save:
· Bring lunch to work for a month (saving = $200)
· Skip alcohol for one month (saving = $200)
· Ditch the gym (saving = $60)
If you exhausted ways to squeeze more money out of your paycheque, why not look for other sources of income? Working a couple nights a week at a part-time job not only puts more cash in your account, but it also decreases time and opportunity for you to go out and spend money unnecessarily. Possible jobs include: babysitting, freelance writing, web design, tutoring or teaching English as a second language.
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate