Saving a deposit for a home is a big step, and while it may feel like the biggest hurdle has been jumped, there are more ahead. Taking the time to research and get to know the next step in the process could help you save thousands in the long run.
Here are a few ways to plan ahead, and save money when buying a home.
You May Not Need 20%
A 20% deposit is the goal, however many lenders offer finance with a smaller deposit, however with a smaller deposit you may end up paying higher fees. Buyers with a lower deposit will be required to pay lenders mortgage insurance which protects the lender in case the buyer cannot pay. The lender may also pay a higher interest rate.
There are Extra Costs
Once the offer has been accepted and the deposit paid, there are more costs to follow including stamp duty, transfer fees, government fees, charges for building and pest reports, lenders mortgage insurance and conveyancing and solicitor’s fees. These all come out of the deposit, leaving less taken off the principal of the loan, and more paid in interest over the lifetime of the mortgage.
By saving more than required for the deposit to cover the extra fees, you will save on interest and have a lower monthly repayment.
Shop the Home Loan Market
Once you have your deposit and know your budget, it is time to gain pre-approval from a lender. Take the time to educate yourself on what is available, and shop around to find a mortgage that works for you.
Compare interest rates, product features, zero establishment fees, frequent flyer points or other value-adds. Check advertising and take other lender’s offers to your preferred bank as the market is very competitive and lenders may be prepared to haggle to win your business.