April 14, 2014
Property ownership is a goal for many Australians, yet saving for a deposit may become a real challenge as potential buyers juggle living costs with their disposable household incomes
Local Penrith home loan specialist suggests traditional saving techniques are still widely used such as setting a target, formulating a plan and carefully managing their cashflow.
Hundreds of thousands still manage to achieve the dream each year by using these traditional techniques, however, some borrowers are exploring unconventional ways to help them save for a deposit sooner, according to Mortgage Choice.
“While penny watching and scaling back on life’s luxuries are still proven ways to save for a deposit, there are also some not-so traditional methods Australians are utilising to get them home sooner.”
Back up your budget with the help of the following savings strategies:
Account for costs including regular savings for your home deposit.
Boost your efforts via a high interest savings account.
Set up an auto-transfer from your salary.
If selling an asset to build your deposit, plan ahead. Most lenders require you to have a genuine savings deposit. Typically, this is money saved and held over at least three recent successive months and excludes lump sum deposits from the sale of personal assets. However, some lenders will take such funds into consideration on a case by case basis, if after selling the asset you can show a history of maintaining or increasing the savings over at least three months. Research what you need.
Some lenders accept rental payments as evidence of genuine savings on the basis you have at least a 5% deposit plus there is evidence of six to 12 months’ worth of continuous rental history and the property is leased through a licensed property manager. Lenders will assess your eligibility for a home loan approval by comparing your current rental payments and any regular savings with the cost of the home loan repayment. If you fit the criteria, ask your mortgage broker for more information.
Cut your expenses in half by splitting the purchase with a co-owner. Sharing the purchase costs with one or more people can increase the deposit amount, helping you to enter the market sooner and with greater borrowing capacity. It can also ease the challenge of being approved for a home loan. However, it’s important to seek independent legal and financial advice prior to signing a co-ownership agreement, loan contract or purchase contract. Everyone must understand their rights and obligations as well as the plans each co-owner has for the property and their loan repayment strategy.
Ask family to guarantee your loan by using their own property as security. While this won’t put you steps ahead with your loan deposit, the guarantor will help you bridge the deposit gap (in theory only, as the guarantee isn’t money) and avoid paying lenders’ mortgage insurance. However, you must be able to service the loan on your own. The guarantee can be removed in future once enough equity is built up. Seek legal advice to ensure both parties are fully aware of their rights and responsibilities.
Visit Paul Holland’s website at www.mortgagechoice.com.au/paul.holland call 0410 787 607 or email firstname.lastname@example.org