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First home buyers generally face a difficult hurdle when trying to buy their first home – saving the required deposit. You need a sizable amount of cash to get in the door! While monetary gifts from family or friends are a great way to quickly save your deposit, most lenders will want you to show 3 months’ regular savings history before they’ll approve your loan application.
Lenders no longer will lend you 100% of the purchase price of your home, so you need to put some money towards the purchase. How much is a very important decision.
As a general rule, you’ll need a deposit of at least 5% of the property value. Other costs to consider are legal fees, stamp duty on the property, and if you are borrowing more than 80% of the value of your home you’ll be liable for a one off lender’s Mortgage Insurance fee. A bigger deposit gives you big advantages, the bigger the deposit the smaller the loan is, and that means lower repayments. You'll also pay less interest over the life of your loan, more money in your pocket.
Also Building a good deposit shows the lender that you have a strong saving history.
Set realistic goals & stick to a budget is the key to saving for a deposit. Budgeting is not a dirty word, whether you are rich or poor, financial success comes down to a simple formula. In order to save, you must spend less than you earn. With a little discipline and budgeting, financial goals can quickly become reality. A budget is a great way to track your monthly income and expenses because it gives you a clear picture of where your money goes and how much you could be putting aside to reach saving goals. Setting up and sticking to a budget is important – a financial management tool like our Budget Worksheet can help you figure out what you spend and what you could save.Next Step: Financing Your First Home
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