Ultimate House Deposit Savings Checklist

This can be an overwhelming part of the process, but take a deep breath… You’re in the right place. We’ve created an easy checklist so you’ll know how much you need to save and learn some inside tips to make every cent count.

How much can I borrow?

Before you bury yourself in budgeting spreadsheets and cut out your daily coffees, first of all you need to know how much to save based on what you can borrow.

Lending institutions (or banks) work out the amount of money they’re willing to lend you depending on your personal financial circumstances. This includes what you:

• Earn
• Own
• Owe – This is where your credit score comes into play. Car or personal loans, debts, credit cards and yes, even your Afterpay account.
• Residential status – Your previous property purchases and/or rental history.
  A general rule of thumb is you should be paying less than one third of your income on your mortgage repayments.

How much deposit will I need?

The more deposit you have, the less you’ll have to borrow. This can mean you’ll own your property sooner as the repayments will be lower and the term of the loan can be shorter.

Most lenders require a minimum of 5% deposit on the property’s purchase price. As of October 2021, the median dwelling price for a house or unit in Newcastle and Lake Macquarie suburbs is $818,000. So, a 5% deposit will be $40,900.

Traditionally, a 10% deposit was commonly required, but with rapidly increasing house prices, that has shifted to allow first home buyers into the market.

It’s worth noting that if a deposit is less than 20% of the property’s asking price, purchasers are required to pay an additional Lender’s Mortgage Insurance (LMI). Mortgage Insurance protects the lender in the event that the borrower defaults and is unable to meet their loan repayment obligations. LMI is calculated as a percentage of the amount borrowed. On a property worth $600,000 with a $90,000 deposit, the LMI will be between $4,705- $7,200.

To ease the pressure of saving a house deposit, research all the government assistance schemes that are available to you. There are multiple nationwide and state-based initiatives, especially for first home buyers, that can make homeownership more achievable in the current market.

Tips for saving a deposit

Now that you know where all your hard-earned cash will be going, it’s time to manage your finances to make the Aussie dream a reality.

Consistency is key when it comes to saving money. Small amounts and often is the best strategy. The old English saying says ‘Look after the pennies, and the pounds look after themselves.

1. Make a budget and stick to it.
2. Find a savings account with the best possible interest rates. Make regular deposits and resist the temptation to withdraw funds.
3. Consider options for cheaper rent and bills, like moving in with your parents or co-sharing with flat mates.
4. Deal with any debt and pay it off as soon as possible. Reduce or get rid of store or credit cards.
5. Eat at home more. Limiting dining out and take-away is an effective way to save significant dollars every week. Make and take your own lunch to work.
6. Become a professional bargain hunter. If you can wait for 20% off sales, free postage options, 2 for 1 deals, you’ll save more and be ready to buy your home sooner. Save smarter, not harder.
7. Save a windfall. Any lump sum payments, like a tax return or bonus at work, will boost your savings exponentially.
8. Review your current finances to find better deals on utilities, phone plans, cheaper petrol, insurance, bills. Redirect those savings toward your house deposit.
9. Check your eligibility for government assistance programs and apply for available grants and fee relief.

What additional costs are involved in buying a property?

Buying a house is one of the most significant investments of your life.You need to make sure every aspect of the transaction meets legal requirements and that you are fully aware of the condition of the property you are buying.

LOAN APPLICATION FEES

It’s an upfront fee that’s non-refundable. It covers the preparation of the loan application documentation, legal fees for standard mortgage preparation and one standard valuation.

PEST & BUILDING INSPECTIONS

It’s important to get a professional pest & building inspections carried out on a property to discover any costly structural issues that may impact the value. Termite infestations and damage can run into the tens of thousands of dollars to rectify so it’s critical to factor this knowledge into your offer.

CONVEYANCER/SOLICITOR FEES

Employing a conveyancer will give you a central point of contact to help you manage the legal and administrative aspects of your homeownership journey. They:

Advocate for you during the legal processes
Provide advice and help you fully understand your rights and obligations
Organise and submit all necessary paperwork and checks
Stay up to date and manage changes to complex contracts, legislations and regulations

STAMP DUTY

Stamp duty is a state government tax on the transfer of property and is assessed on the property’s sale price. Stamp duty is payable on any property unless you’re eligible for the First Home Buyer exemption in NSW.

MOVING COSTS

Moving houses is a HUGE effort, logistically and sometimes financially if you’re not savvy about it. Shop around, do your research and compare prices.

INSURANCES

You need assurance that you can afford the repayments on your mortgage, so it’s wise to be prepared for any financial situation. You may want to consider purchasing mortgage protection, lenders mortgage insurance, home and contents insurance or income protection.

Who should I talk to?

You can talk to a conveyancer at any time during the process of buying or planning to buy a house. From saving for a deposit to making an offer on your dream home, a conveyancer will provide tangible value every step of the way.

Ideally, you should enlist the help on a conveyancer before a Contract of Sale is signed. They will review your contract with a fine-toothed comb and identify any glaring issues. They’ll also advocate for you during any contract negotiations of the property purchase.

To ensure a smooth and stress-free homeownership experience, talk to the team at Impero Conveyancing. Call us on 4910 0522 to start the conversation today!