Here’s How to Save for Your Deposit Faster!
Are you dreaming of owning your first home? Currently, it takes an average of five to six years to save for a deposit. But who really wants to wait that long? Today, we’ll explore four strategies to help you fast-track your path to home ownership.
Patience is a Virtue, But Not for Homebuyers!
While patience may be a worthwhile trait, the tale behind that saying comes from an idle vagabond—not the best inspiration for eager homebuyers navigating a competitive market. Let’s skip the waiting game and discover practical ways to shorten the time it takes to save your deposit—without sacrificing your values!
1. Consider Buying with Less Than a 20% Deposit
You don’t have to wait until you’ve saved a full 20% to buy a home. Some lenders allow deposits as low as 5% or 10%. Keep in mind, however, that with a deposit less than 20%, you’ll likely be required to pay Lenders Mortgage Insurance (LMI). This insurance protects the lender in case you can’t keep up with mortgage repayments, and it can be costly—potentially adding more than $10,000 to your upfront costs.
Fortunately, some borrowers have the option to finance the LMI into their home loan, although this would increase your repayments and the total interest paid. While LMI might seem like an extra burden, it can be a way to enter the market sooner and position yourself before property values rise. Let’s discuss if this option could work for you.
2. Have a Guarantor to Support Your Loan Application
A guarantor—often a close family member—can provide additional security for your home loan, typically by leveraging their home equity. With a guarantor, you might be able to secure up to 100% of your home’s value without LMI, although lenders generally expect you to have saved at least 5% of the deposit. If your family is willing to help, reach out to us about home loan options that may be available.
3. Explore the First Home Guarantee Scheme
If having a guarantor isn’t an option, saving just 5% could qualify you for the First Home Guarantee (FHG) scheme. This government initiative guarantees up to 15% of your loan, allowing you to purchase a home with a minimal deposit, all without the added expense of LMI. Spots in this program are limited, and specific eligibility criteria apply, so let’s discuss if this could be the right fit for you.
4. Boost Your Savings with Your Super Account
Consider the First Home Super Saver Scheme. This program can enhance your deposit savings by as much as 30% compared to a traditional savings account. By making voluntary contributions to your superannuation fund—up to $15,000 per year—you can benefit from a lower tax rate of 15% on those contributions.
When you’re ready to buy, you can withdraw your contributions—up to $50,000, and if you’re purchasing as a couple, you may withdraw up to $100,000. This option not only increases your savings but also potentially yields higher returns than standard savings accounts.
The Importance of Fast-Tracking Your Deposit
It’s crucial to remember that the national average of 5.6 years is based on saving a deposit equal to 20% of current median home prices. Given that property values are likely to rise over time, delaying your purchase could mean needing an even larger deposit down the line.
In short, acting sooner rather than later can put you in a more advantageous position.
If you’re ready to start your journey toward home ownership, reach out to us! We’d be happy to discuss your situation and determine which of these strategies might best help you achieve your goals.
0447654321
