Buying a first home starts with saving a deposit. But for most Kiwi first home buyers, already struggling with rising rents and food costs, setting good savings habits can feel like an impossible task. To help put first home buyers in the best possible position to buy a first home, we asked some of the Mortgage Express team to share their top tips for first home buyers saving a deposit.
Pay off your expensive debt first
Short term debt – like credit cards, hire purchase, car or personal loans – often come with high interest rates and extra fees for late or missed repayments. To start with a clean slate, pay off your high interest debt first or consider consolidating all of your short term debt into one manageable loan to make repayments easier.
When applying for a home loan, lenders will take into consideration all of your existing debt and your ability to repay this on top of a mortgage. And with recent changes to the CCCFA, lending restrictions have tightened even further. So it’s imperative you clear your debt first.
Once you’ve paid back your debt, consider putting all of the difference into a separate savings account to bump up your savings.
Start small, then go big
The secret to setting sustainable, long-term savings habits is to start small. For first home buyers with big expenses, try saving just $5 a week. As you slowly increase the amount you save, you’ll be surprised at how much even the smallest amount can add up to over time.
Regularly review your budget and your spending habits to see where you can cut down on unnecessary spending. Every time you forgo spending on something that isn’t vital, try moving the money you’ve saved into a separate savings account.
And if you aren’t already a contributing member of KiwiSaver, sign up and start saving there too. As well as your own and your employer’s contributions, you’ll receive investment returns and Government contributions, all of which could help you when it comes to buying your first home.
Get support from friends and family
Many Kiwis are fortunate to have family or friends who may be able to help them with a cash gift or stand as guarantor to buy a first home. Often this is the last push they need to their deposit, to get them over the line and into a first home.
If you are considering this route, it’s important you get expert advice and guidance around the pros and cons of buying property with family or having someone you know act as guarantor. Get in touch with a Mortgage Express branded mortgage adviser to find out if this type of lending would work for you.
And share your savings goals with your friends and family so they can help you stay motivated too!
Track your progress
Checking your progress regularly will help you stay on track with your savings goals. If you’re a first home buyer, check that you’re eligible for any of the Government first home buyer support.
And talk to a mortgage adviser early – if you’re not quite ready to buy a first home or you’re struggling to save your deposit, your mortgage adviser may be able to help you with a financial plan to get you there in time.