Views on housing affordability
According to the survey, 62 per cent of respondents think housing affordability is worse now than it was a year ago and about 58 per cent thought it was only going to get more unfortunate in the next year.
Disappointed still, 87 per cent of non-property owners expressed their concern over the ability to afford their first home. When shopping around, the survey found that a good price is still the most important factor (79 per cent) for buyers. This necessity was over reliability of public transportation at 52 per cent and proximity to work at 45 per cent.
One of the key takeaways of this survey wasn’t the uncertainty of the property market, instead it was the 89 per cent of non-homeowners who still believe that it is important to be able to purchase their own home – if they could afford to, that is.
Affordability really only comes down to one thing: saving. If you can make a good plan to save for your first home, you can indeed get your dream home one day.
Are you really ready?
At this point, you have to ask yourself: Are you really ready? As you start your financial planning, realise that it isn’t just the deposit you’re saving for – it’s also the fees that come with home ownership. Anything that breaks and needs repair is no longer on a landlord, it’s on you. So as you are saving for your deposit, you might also want to consider building up a side emergency fund just in case.
Fix your credit score
Don’t forget, your credit score is going to have a big impact on your chances of getting a good home loan. You’ll want to make sure all bills are paid on time and your debts are cleared. Make sure you are paying in full – and, if you can, pay the max. If you know your credit report could use a bit of work, start paying off your bills and fixing that score immediately. It will be good to work on this as you save up.
File your paperwork
These details will be important when it comes time to get pre-approved:
- Financial history,
- Credit reports,
- Proof of income,
- Bank statements and assets,
- And personal information.
Know your time frame, include more info
It can take quite a few years of financial planning to save up enough for your property deposit – Mortgage Choice’s 2016 First Home Buyer Survey found that Queensland first time home buyers had to save for two years just for the first two-thirds of their deposit, reported Domain.
Additionally, know what you are entitled to as a first time home buyer. The First Home Owner Grant (FHOG) varies from state to state, but essentially is a one-off grant to help first-time buyers get into the property market. Once you know what your territory can help you with, you can get started working out the rest of your savings.
First Home Super Saver Scheme
As announced in the 2017 Federal Budget, from 1 July 2017, super can be used to assist with saving for a first home. If you’re saving for your first home you can make voluntary contributions to super – taking advantage of the tax benefits of super – and then withdraw the money to buy your first home.
You can contribute up to $15,000 per year (from both pre and post income tax money) up to a maximum amount of $30,000 in total. Earnings can be withdrawn along with the contributions when a home is purchased.
On withdrawal, concessional contributions and earnings will be taxed at the individual’s marginal tax rate, less a 30 per cent tax rebate. Non-concessional contributions are withdrawn tax-free. First Home Super Saver accounts are created on an individual basis – meaning each member of a couple can have their own account. Importantly, the release of funds to purchase a home will not count as income for certain tests, such as HELP/HECS repayments, family tax benefits or child care benefits.
Use interest to your advantage
When you’re saving for a first home, a budget (that you stick to) is going to be more important than ever. To set this budget, use a savings calculator to enter information and find out how long it will take to save for your price range. Let’s start with a basic example. If the initial amount you are starting with is $10,000 and you make monthly deposits of $200 at an interest rate of 1.75 per cent over a savings term of five years, the total amount at the end of the term would be $23,463.11. Using a calculator you can toggle around until you find a desirable budget for you.
Break down your budget
But how do you break down your budget into a realistic savings plan once you know how much you’re saving? You’re going to have to be disciplined on your spending, that is for sure, however, here is what we recommend you do to make that easy.
It is recommended that half of your budget be used on:
- Monthly bills
- Monthly subscriptions
The next 30 per cent should be spent on the non-essentials. Here, however, it is important to note that just because you have the money, doesn’t mean you need to spend it. If at the end of the month you have left over because you decided to stay in and make dinner instead of go out for an evening of fine dining, put that in your savings!
Of course, that final 20 per cent should be put towards your saving. Some find it easier to set up automatic savings that take money out of your account each month so you don’t even have to say it, making sticking to this budget easier than ever.
We’d also like to point out that these percentages can vary based on what you’ve found appropriate from using the savings calculator – this is just a general guide!
Find the market for your budget
If you’re really itching to get into the market sooner rather than later, one tactic is to move a little further out of the area that you are looking. Only 21 per cent of people in CoreLogic’s survey saw this as an option, but consider this: People rarely find their so-called dream home on the first go around. But, when you pay your bills on time and perhaps even make some renovations to your first place, you are improving your chances of securing that perfect place when the day finally does come to purchase it. And with the right renovations, you are only increasing value to your first home, which will put more money in your pocket for the upgrade.
The team here at Police Bank wants to help get you moved into your dream home without a fuss. Contact us today, and we’ll help you work out everything from a savings plan to fitting you for a home loan. It’s time to turn your dream home into a reality.