While growth in housing prices are ideal for those who already own, or who are buying their own home, for first home buyers this news can be devastating.
Well, when the prices of homes go up it makes it harder for a first home buyer to break into the market. On average, it takes a first home buyer just over 4-years to save a 20 percent deposit. Whereas in previous years, it was taking 3-years to save enough for a home deposit.
Median Home Values Have Risen
First home buyer reports have found that the median value of homes has risen by just over 7 percent in the last 12-months to $469,000. This means that a first home buyer now needs to find an extra $6,000 to meet their obligations if they are buying a home at the median value. For example, the median house deposit price in 2013 was $87,600, but it has now jumped to $93,800.
Unfortunately, wage increases have not kept up with home price increases, which makes it even harder for first home buyers. On average, wages for first buyers rose by 2.6 percent over the last 12-months.
So How Can You Beat the Deposit Blues?
There are a number of ways that you can get into your own home faster, but you have to vigilant and, in some cases, creative. The following are some ideas to get you started:
1. Look for a more affordable home – Buying a home that is smaller, situated in a more affordable suburb or one that needs renovations can reduce the amount you need to borrow. This means that you’ll need to save less of a deposit and that you can buy sooner.
2. Buy within your means – If you cannot afford the home you’re dreaming of, then buy the home you can afford. This will allow you to get into the market and, as homes typically appreciate in value overtime, you will generate equity. This means when you’re ready to upgrade your home you should be able to sell it for more than you paid for it, which means you’ll have a larger deposit for your next home.
3. Base your home loan value on how long it will take you to save – In order to avoid paying costly Lenders Mortgage Insurance (LMI), which covers a lender for loss, then you’ll need to save a 20 percent deposit. A 20 percent deposit for a $200,000 home is $40,000. Therefore, for every $10,000 of a deposit that you can save, you can borrow approximately $50,000. Let’s say you tighten your belt and can save $200 a week, over 52 weeks or 12-months this adds up to be $10,400.
4. Sell any unneeded assets – If you own cars, boats or other big items of value you can sell these to get your deposit faster. You can also have garage sales or sell any unwanted household items online or in the paper to generate more income.
5. Research – Know the property market inside and out, work out what represents a good deal and a bargain. If something cheaper pops up then have a look at the property and consider whether or not it could be a viable option for you.
Are you a first home buyer? If so, then contact eChoice and discuss your options TODAY.
Written by eChoice