Monday, October 28, 2013
Saving Up For Your First Mortgage
Are you a home owner yet? Or a property investor? Are you currently neither but are saving up for your first place?
If you haven't bought a property to invest in or live in, then you might be wondering how to and how much to save up for your first property and first mortgage.
Depending on how much you wish to borrow, the idea of borrowing up to hundreds of thousands of dollars can be daunting. Remember, only borrow what you can comfortably afford to repay.
How Much Do You Need To Save Up To Buy A Property?
Property expenses vary depending on the property buy price. Miscellaneous expenses are approximately 5% of the house purchase price.
Some of the common expenses that you'll encounter when buying a property are:
* 5% to 10% deposit on the buy price
* Bank deposit cheque fees (usually used to pay stamp duty, the 5% or 10% deposit and the final deposit amount at settlement)
* Stamp Duty to the OSR which can be from $10k and upwards, approx $40k on a $1m house
* Home and Content Insurance - your lender may require insurance to be organised
* Bank fees for attending settlement
* Adjustment costs for council rates, water/sewerage and water usage
* Legal fees for conveyancing
* Land Titles Office Charge
I've written plenty of posts about how to save money, how to understand loans, saving up for an emergency fund and I've also written plenty of posts on our property buying experience.
So in summary, if you want to save up for your first house and mortgage:
1) Aim to save 5% of the purchase price and that will approximately cover the various fees that you'll have, such as the ones listed above
2) Aim to save at least 20% of the purchase price to use as a deposit so that you won't have to pay lenders mortgage insurance
3) Example: On a $1m house, save $200k for the deposit and save $50k(approximately 5%) for the miscellaneous expenses
I've been looking at Newcastle Permanent's fixed rate loans which are rather competitive. Their two year fixed rate is 4.64%pa. Before you start attending open houses and making offers, ensure that you get a pre-approval organised with your lending financial institution. That way, you know what you can borrow and what you can repay.
Buying a property is really exciting and I wish you all the best in saving up for your first, second or multiple properties.