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Tips for getting your finances in order

There are a lot of boxes to tick when buying a home for the first time, especially when it comes to getting your finances in order. Across Australia, banks are tightening their lending policies and are being more scrupulous when looking at people’s ability to service a loan long-term. What that means for you is, you need to present your finances at their best when you sit down with a mortgage broker or lender.

To do this, give your finances an overhaul with our checklist for getting your finances in order.

Save for a deposit

Saving for a deposit takes time and can require a lot of discipline in your day-to-day spending. Here are some ways the Australian Securities & Investments Commission suggest to expedite your savings;

  • Develop a savings plan

  • Cut back on the extra expenses

  • Get a high-interest saving account

  • Move back into the family home

  • Automate your savings

  • Consider investing in shares or managed funds

Set up a high-interest savings account and put a portion of your pay into it every time you get paid, with the goal to save up to 20 per cent. But saving 20 per cent of a home loan is not always realistic. You can secure a home loan with as little as a 5 or 10 per cent deposit. The catch here is, if you obtain a home loan with less than 20 per cent deposit, you will be required to take out Lender Mortgage Insurance, which protects the lender if you default on the loan. You can pay this as a one-off payment upfront, or it can roll into your loan repayments.

Clear your debts

Increase your borrowing capacity by clearing all your debts. This includes paying off your credit cards, store cards, personal loans and student loan. To do this, the Australian Securities & Investments Commission recommend you;

  • Tally up your debts so that you can get a clear picture of where you stand

  • If needed, seek professional help tackling the debt

  • Set a budget, one that is realistic and that you will stick with. If you can afford to, put more towards extra repayments

  • Prioritise your debts. This can be either paying off the debt with the highest amount of interest or paying off the smaller debt first which will give you a sense of achievement

  • Make your repayments automatic

Set a budget

The only way you will reduce your debt and meet your savings goal is by setting a budget, and sticking with it. Over a few weeks, take note of how much you spend day-to-day and where. What are necessary expenses (rent, bills, food etc.) and what are extra costs (subscriptions, eating out etc.)? You will quickly see a pattern in your spending habits, pinpointing the areas where you can save money, such as cutting out your morning café run and unused subscriptions and gym memberships.

Establish a realistic budget that will allow you to reduce your day-to-day living expenses, but will also give you enough leeway for those one-off expenses. This will give you a better chance at sticking to the budget over some time, and ultimately to achieving your real estate goals.

Meet with a lender

Whatever stage you are at with your finances, it’s good to meet with a lender to get an understanding on where you are at financially. Based on your current income and living expenses, they will be able to give you a rough idea on the amount you will be able to borrow, which will in turn guide you on how much you will need to save for a deposit and what you need to do to achieve that. Having a set figure to work towards can help motivate you to reduce your debt and save.

Access government grants 

Learn about the different government grants that are available for first home buyers, such as the First Home Buyers Assistance scheme and First Home Owner Grant (New Homes). These vary from state to state, so visit the first home website to find out what you have access to in your state. Understanding these grants from the outset can help guide your decision on the type of property you want to purchase.

Getting all your finances in order can seem like a daunting task, but it will put you in a position to being one step closer to achieving your real estate goals.


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