If you're a first home buyer, one of the biggest questions you're likely to have is how much deposit you'll need to save up in order to purchase your first home. In this blog post, we'll explore the factors that influence the size of your required deposit and provide some guidance on what you can expect.
1. What is a deposit?
Before we dive into the specifics, it's important to understand what a deposit actually is. A deposit is the amount of money that you contribute towards the purchase price of your home. This is typically a percentage of the overall purchase price, and is paid upfront at the time of settlement.
2. How much deposit do I need?
The amount of deposit you'll need will depend on a few different factors:
Lender requirements: In general, most lenders require a minimum deposit of around 5-10% of the purchase price. However, this can vary depending on the lender and the type of loan you're applying for. Some lenders may require a higher deposit if you have a low credit score or if you're borrowing a larger amount.
Property price: The price of the property you're buying will also impact the size of your required deposit. As a general rule, the more expensive the property, the larger your deposit will need to be.
Government incentives: Depending on where you live, you may be eligible for government incentives to help you purchase your first home. For example, in Australia, the First Home Owner Grant (FHOG) can provide up to $20,000 towards the purchase of a new home. This can reduce the amount of deposit you need to save.
3. Tips for saving for a deposit:
Saving for a deposit can be challenging, but there are a few tips that can help you get there faster:
Set a budget: Knowing exactly how much you need to save each month can help you stay on track and avoid overspending.
Look for ways to reduce expenses: Consider cutting back on non-essential expenses like dining out or subscription services to free up more money for savings.
Consider a high-interest savings account: A high-interest savings account can help your savings grow faster thanks to the interest earned on your balance.
Consider government incentives: As mentioned earlier, government incentives like the FHOG can help reduce the size of your required deposit.
In conclusion, the size of your required deposit as a first home buyer will depend on factors like lender requirements, property price, and government incentives. Saving for a deposit can be challenging, but with careful planning and budgeting, it's possible to achieve your goal and make your first home purchase a reality.
Chat to a Pathway Finance Broker today!
Book an appointment online or call us on 08 8331 0316