Hey, what do you want? Like, really, really want? If you’re similar to a lot of young Australians, you might want to own your own home (psst – this can be a great wealth-building idea as well as a lifestyle decision). But where do you start? What do you do first? We’ve got you covered. So take five – steps, that is – along your new path towards your first home.
Step 1: Dreams come in all shapes and sizes
Think about the type of home you want and where you’d like to live. Go on, dream a lot, not just a little. Without this important ‘thinking step’, it can be harder to reach your goal. After all, if you don’t know what you want, how will you ever get it? Of course, we don’t mean the street or the apartment number (or maybe some of you already have these in mind). But picture the type and location of your first home, one that’s going to suit your lifestyle and values. Relax, nothing is being locked in! You’re just planning at this stage.
Step 2: Gather your intel. Be a step ahead of the rest
Scan the real estate advertisements and sales results for the neighbourhoods you like (and keep a watch on adjacent areas). This’ll give you more insight about prices for the various types of homes and locations. Introduce yourself to a couple of local real estate agents to get an even deeper understanding of prices, trends and little quirks of the ’hoods you’re considering. Local agents are a great way to learn what you can get for your money.
Step 3: Ready, set, goal! Set your savings target
Now that you’ve got a price range, it’s time to set your savings goal. Often, 20 per cent of the purchase price is a good amount for a home deposit. But keep other costs in mind too, such as stamp duty and legal fees, and you might want to aim closer to 25 per cent. Don’t worry! We know it sounds like a lot, but some lenders might approve a mortgage based on smaller deposits – say, 10 per cent of the purchase price. But you know what a lower deposit might mean, don’t you? Bigger mortgage repayments and the cost of lenders mortgage insurance. The choice is yours.
Step 4: Budget – your way. Find out your savings ability
Great, you’re on a roll. Now let’s plan to reach that savings target. Warning! This step is a lot less exciting than browsing real estate ads, swanning through home inspections and visualising your new lifestyle. It’s about finding out how much you earn and how much you spend – and we mean really spend, not just what you think you spend. Yep, you guessed it: it’s budget time. Get out the spreadsheets, notebooks, bank statements or online budgeting tools (like our budget calculator) and make a list of all your expenses and all your income.
Now is also a good time to set up a dedicated savings account for your deposit. If you’re an ING customer, you can open a Savings Maximiser and call it something like ‘My first home’ or ‘#HouseGoals’. Don’t be shy – get personal with it! A strong nickname will help your goal stay at the front of your mind every time you make a deposit.
Step 5: Mind the gap. Estimate your savings journey
Congratulations! You really are on the home straight (pun intended). The gap between your income and what you spend is your savings ability – and it’s going to be the backbone of your savings plan. Let’s say you have $200 left over each week, or perhaps $1,000 a month. Divide your estimated deposit by your savings ability and, hey presto! This gives you the number of weeks or months it’ll take to achieve your deposit. (Psst: if online tools are your thing, you could also try plugging the numbers into our savings goal calculator.) Fist bump! You’ve successfully identified and planned your home deposit savings goal.
But, hang about, just a last word. Don’t be disappointed if you find your savings ability is smaller than expected or that it may take longer than hoped to reach your goal. This knowledge is power! These first five steps not only give you a goal and a plan but can also help you set your values and priorities. Can you reduce your expenses? Can you increase your income? Or can you look in a different price range? Being prepared for these choices puts you a step ahead of most savers. And don’t worry, we can help with that, too. We have plenty of tips and suggestions to boost your savings and fast-track your first home deposit goal.
For now, however, sit back and relax. You’re on your way. By following these five steps, you’ve laid the floorplan, the foundations and the building blocks (okay, too many home-related puns) for your journey towards your first home.
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