Will we ever be able to afford a house? The answer is yes.
Purchasing real estate is still the goal of most Australians and for many people it is something that may seem out of reach. Apart from being a major step into the ‘grown up’ world (no matter how old you are), saving enough for a deposit to purchase a house is a large commitment.
Through my eyes as a mortgage broker, here are some tips to help you.
Work with 3 accounts and start being smart with your money – stop wasting it!
(1) A savings account that cannot be accessed by your eftpos card. Determine how much you need to save and break that down into how much you need to save from each pay packet. Ask the payroll person to split your pay to put savings directly into a separate account – even with another bank so you cannot access it.
(2) Bills, food and rent account – this ensures you always have enough money to meet your monthly commitments.
(3) Spending account – this is the Mimco handbags, new shoes, cocktails on Friday night, tickets to the Danny Green fight, takeaway coffees and breakfast on Sunday.
Do without! Downsize to a cheaper car for the short term, pay out the car loan and use that money to save for a home. Learn to say NO. Go without new clothes, take your lunch to work, go for a beach walk on a Sunday morning instead of purchasing expensive breakfast.
You don’t need to buy the house of your dreams. Any property expert will tell you that building equity is the way to climb the property ladder. Start in the lower price bracket, pay down the mortgage and then move up. Buy the worst house on the street and make it into a gem.
Mum and Dad may be able to assist you with a Guarantor or Family Pledge loan. These involve a limited liability against Mum and Dad’s home or investment property. They are not suitable for every family and need to be thoroughly researched. In this case you do not need any deposit, just the earning capacity to qualify for the loan. Without a Guarantor you will need about 15% of the purchase price saved.
Get a gift from a relative – you may laugh at this comment, but many parents or grandparents may be able to assist you by providing a gift. Put it into your savings account and don’t touch it!
It is affordable as interest rates are low. If you purchase for $350,000, a loan that is 90% of the house value will cost you approx. $346 per week – almost the same as renting. This may not get you into the suburb of your choice, but it will get you into the property market and you can then set a target of moving within so many years.
There is never a better time that today to start. Tomorrow you will be glad you did.