Are you dreaming of the day you unlock the door to your very own home? For many of us, that day can’t come soon enough. Homeownership is not just a financial goal but a significant milestone that reflects your hard work and smart choices. Navigating through mortgage advice, mastering the art of saving strategies, and piecing together that crucial house deposit can feel like a puzzle. But here’s the good news: with the right financial strategies, that picture of homeownership becomes less of a dream and more of an achievable goal.
For most Australians, it begins with creating a plan that accommodates your current lifestyle needs while allowing you to prepare for homeownership. An effective financial plan uses tested financial strategies such as informed decision-making, saving, and avoiding debt, and results in confidence as you secure your first mortgage.
You can achieve this exciting milestone by applying these five financial strategies to help turn your ‘one day’ into ‘day one’ of a new chapter in your first home.
Become Informed:
Before making big financial choices, it’s crucial to be well-informed. A home is generally your most significant purchase, and your mortgage will likely be your greatest monthly expense for the next 25–30 years. Prepare your finances for this investment by educating yourself on relevant information such as:
Property Market Research
Australia’s vast territory offers homebuyers a huge variety of potential housing opportunities. Even if you plan to buy a home in the area where you have lived your entire life, you may be surprised by the reality of the housing market when you are ready to purchase.
Suburbs Vs Urban Real Estate Opportunities
Property in urban areas tends to be more expensive than homes in family-friendly suburbs. Consider what is important to you in a home, proximity to the city centre, or the ability to get more house for your money.
Mortgage Options
By far, the most popular type of mortgage loan for Australians is the standard variable rate home loan. Other options that may be available include a fixed-rate mortgage, a guarantor home loan, or a construction home loan. Lenders and banks may offer these loans at variable rates and with varying debt-to-income limits. So, it would be best to speak directly with lenders to see how your unique financial situation and home needs can be addressed.
Government Incentives for Homebuyers
The Australian government offers several incentives to help get families into the homes they need. These include:
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Home Guarantee Scheme and Family Home Guarantee – Putting Your Superannuation Funds to Work
The Home Guarantee Scheme is a government-backed loan option that allows you to purchase a home with a smaller home deposit, often only 5% of the price of the home. Some families may qualify for a home deposit of only 3% of the total purchase price. The Home Guarantee Scheme also allows persons to use funds held in their Supers towards their home deposit.
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First Home Owner Grant
First-time homeowners who pursue a new construction project may qualify for a grant of up to $10,000 towards the construction costs with the First Home Owner Grant.
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Geographical Options
Territories, states, and municipalities may offer geographically specific first-time home buyer incentives. One such offer is the following:
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Queensland First Home Owner Grant
The Queensland government is invested in helping prospective homebuyers acquire suitable homes in its territory through the Queensland First Home Owner Grant. If you are determined to be eligible, you may qualify for a grant of $15,000 towards the purchase or construction costs of your new home.
Preparation:
2. Create and Stick to a Financial Plan
Using tools such as a budget or another organised financial plan can help you keep your goal of homeownership on track. Create a budget that adequately cares for your current needs while allowing you to move funds from non-essential things to savings. These savings can become part of your house deposit and protect your finances if something unexpected happens. In addition to budgeting for purchases, use saving strategies that work for your desired future.
3. Pay Down or Eliminate Debt to Improve Loan Eligibility
In the financial world, your debt-to-income ratio is an influential metric. This ratio represents the portion of your income that goes towards paying debts every month, and lenders scrutinise it closely when determining your eligibility for loans. A high ratio suggests that a significant portion of your income is tied up in debt repayments, making lenders wary about your ability to manage additional loan repayments.
Each lending institution typically has thresholds for permissible debt-to-income ratios, factoring in your existing commitments and potential mortgage repayments. You can improve this ratio by actively paying down or eliminating some of your current debts – credit card balances, personal loans, or other financial commitments.
In practical terms, this means that you present yourself as a more appealing candidate to lenders and may also qualify for more favourable loan terms or even a larger loan amount. This could be the difference between purchasing a home that meets your needs versus one that surpasses your expectations. In the journey towards homeownership, strategically reducing existing debt can be a game-changer.
4. Save for a House Deposit
For many Australians, saving for the house deposit is the pivotal first step towards the dream of homeownership. The size of this deposit often sets the stage, dictating the kind of home you can aspire to and the extent of a loan you can comfortably manage.
But as you delve deeper into the homeownership journey, you’ll realise the deposit is just the start:
- Emergency Fund: A financial cushion for unexpected moments, ensuring your path to homeownership stays smooth.
- Home Purchase Extras: Beyond the house’s price, there are additional costs like stamp duty, legal fees, and moving expenses. Preparation is key.
- Maintenance Projects: In the early days of your new home, specific tweaks or fixes might be necessary. Planning for these ensures a seamless transition.
By understanding the broader financial landscape beyond the initial deposit, you’ll be better positioned for a successful and stress-free move into your first home.
Implementation:
5. Put Your Plan Into Action
In reality, the most important financial strategy you can pursue is implementing your financial plan. The goal of homeownership is reasonable and financially sound. Once you have created a plan that properly accommodates your family’s needs, current financial situation, desired community, and income and savings goals, you should stick to it.
Craft a tailored financial plan for homeownership with the guidance of Super Network’s advisors. Together, we can navigate the path to your first home. Contact us to start your journey.
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