Saving for a home can be a difficult task. Unless you’re a millionaire or have won the lottery, you’ll most likely have to scrimp and save for a few years to earn enough for that elusive 20% deposit.
However, you may be resourceful and find ways to reduce the price of purchasing a property up front. Here are a few smart methods to save on your first mortgage.
1. Take the time to compare loans
Don’t accept the first home loan you come across. There are many different forms of home loans, such as fixed, variable, interest-only, and so on. Make sure you compare, shop around, and do your homework to locate the best home mortgage for your needs.
When looking at home loan interest rates, don’t forget to factor in the comparison rate. The comparison rate is essentially the loan’s ‘real cost,’ taking into account any additional fees or charges. Some individuals overlook this and focus solely on the offered pricing.
2. Avoid Lenders Mortgage Insurance (LMI)
If you don’t have a 20% deposit, Lenders Mortgage Insurance (LMI) might be a costly fee to pay. You may avoid this by putting aside a 20% deposit – which will be considerably easier to save for if you’re buying a less expensive property. You can also apply for the Federal Government’s First Home Loan Deposit Scheme to avoid the cost of LMI.
3. Broaden your search for a home
Consider widening your home search by a kilometre or two if you have your heart set on a particular suburb but it is out of your price range. Similar to ‘bridesmaid suburbs’, they have as much to offer, but at a lower cost (and cheaper council fees).
4. Negotiate pricing
When shopping for a home to buy, compare properties in the region and don’t be afraid to haggle over costs if you believe the seller is being unreasonable. By looking at real estate listings, attending auctions, or other RP data, you may learn what similar properties are selling for in the area and use that information to your advantage when negotiating a price.
Slashing a few thousand dollars off the asking price will help you save even more money, which you can put into the offset account on your home loan.
5. Put savings into an offset account
Consider acquiring a home loan with an offset account while you’re looking for one. An offset account functions similarly to a transaction account in that all funds in it are ‘offset’ against your home loan debt when interest is calculated, lowering the amount you owe.
Are you having trouble deciding which sort of home loan is best for you? To discuss your options and obtain home loan pre-approval, contact one of our home loan consultants now.
Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.