Saving for your deposit
One of the first things you’ll need to buy a house is a healthy deposit. The bigger your deposit the more options you have, which is why we’ve come up with some saving tips.
How much do you need?
Your deposit needs are as individual as you and will be impacted by the house you’re planning to buy, but in simple terms the bigger your deposit, the smaller your home loan, and the less you’ll pay in interest. The more you can save the better, but a good benchmark to works towards is 15-20% of the property price you’re aiming for. Check out our borrowing power calculator to get an idea of what size home loan you can get.
if you manage to have a deposit of 20% of value of the property then you can avoid the extra expense of Lenders Mortgage Insurance – which applies if you borrow more than 80% of the value of a property.
When you’re applying for a home loan you will need to show proof of regular savings over a period of three months or more. This can include bank accounts, shares, gifts, inheritance, and term investments.
In addition to your deposit, you will also need to allow for stamp duty and other fees and charges. The amount payable for stamp duty can vary, depending on the purchase price of the property.
A Family Guarantee lets parents leverage equity in their own home to guarantee a portion of a child’s mortgage.
It is also a great way to avoid paying Lenders Mortgage Insurance, which can mean some serious savings. If the equity’s there, there’s no doubt it’s an effective way to help a first home buyer enter the market. It may also be possible to apply the Family Guarantee beyond immediate family members, and involve in-laws and step-parents instead.
What will my repayments be?
Credit Union SA knows that everyone has different needs, which is why our home loans can include the following great features:
- Flexible home loan repayment options: weekly, fortnightly, or monthly – it’s your choice
- Additional repayments: save money in interest and pay off your home sooner
- Redraw: withdraw extra loan repayments you’ve made, any time at no cost
- Hold your payments: if things change and you need to take a break for a while
- Home loan offset account: save thousands in reduced interest
Our home loan lenders can meet with you to discuss your options and make sure you get the best home loan
for your needs.
You can also check out our Repayment calculator, which allows you to adjust the key variables to find out what sort of mortgage repayments you should budget for.
For some people saving is second nature, but for most it takes restraint and dedication. Saving for a deposit is great practice for budgeting for future mortgage repayments, and will help show lenders that you’re able and willing to manage your finances. Below are some tips to help you get going:
- Create and stick to your budget. A good idea is to open some specific accounts for certain things (bills, rent, entertainment) and setup automatic transfers to make the saving process easier. A Bonus Savings Account is a great way to put your savings in a safe place, and get bonus interest payments to help you save faster.
- Go through your spending and cut out unnecessary expenses. This might include cutting back on unnecessary bought bottled water or coffees, and cancelling memberships and subscriptions you may no longer use.
- Look at any existing debts (e.g. credit cards and car loans) and work out if you can pay them off any faster. It may be a good idea to start paying off the debts with the highest interest rate first, or consolidate (bundle) your debt to save on interest and fees. Credit cards with interest free balance transfers are a great way to save on interest and fees.
- Saving is a long term plan, but you shouldn’t sacrifice your lifestyle to achieve your goals. Be sure to include things like a trip to the movies or (smashed avocado) brunch in your budget. That way you can still enjoy yourself while watching your deposit grow. Celebrate the little wins as well, like when your savings hit certain milestones. This can help you to build and maintain momentum, which is an important element in achieving a savings goal.
This is general advice only and doesn’t take into account your objectives, financial situation or needs. Conditions, fees and lending criteria apply and are available on request.