Often when a new year rolls around we think about setting ourselves goals. These goals may be to lose weight, pay off debt or, in some cases, to buy a home. Home buying is often a bigger, long-term commitment than other goals. But, in saying this, it is achievable if you’re patient and determined.
The key to success when looking to buy a home is planning. This means defining what you want, and how you will achieve this. By breaking down your main goal of home ownership into smaller steps, known as milestones, then giving yourself a time-frame to achieve these by, you’ll find that your goal becomes easier to obtain.
In order for you to buy a home you need to think long-term and a have a clearly defined goal to begin with. Saying you want to buy a home is not enough. You need to define what type of home, then calculate how much you can afford to borrow based on your current income and expenses. Next you’ll need to work-out how much you need to save to pay for a deposit and cover any fees and charges.
Okay, so grab a pen and paper and let’s get started.
- Determine what type of home you’d like to buy – Write down what you’d like in a home. Include block size, the number of bedrooms and bathrooms, and where you’d ideally like to live.
- Conduct research – Next look for home on real estate sites that fit your requirements. Then write down the lowest cost price to the highest. This will give you a price range to work with.
- Calculate how much you can afford to borrow – Use an online borrowing calculator to determine how much you can borrow. This calculator will ask you about your income, debt and the number of children you have. Write down your borrowing power and your debt.
- Calculate your costs – Ideally you want to save a deposit of 20% so you can avoid paying Lenders Mortgage Insurance (LMI), which can push your loan costs up by thousands. Stamp duty can also add thousands to the cost of your home loan, so it’s best to work this out before buying. Use online calculators to work out both of these.
Next determine your short, mid and long-term milestones, which will allow you to reach your goal of buying a home. Make sure you give yourself a specific date to achieve these by – Monday 30th of May etc.
Short-term Milestones (within 6-months)
1. Pay off your credit card – For a card with a balance of $2,000, you’ll need to pay approximately $100 a week to eliminate your debt within your timeframe.
2. Set-up a home savings account – Open a high interest account. Then deposit a set amount into this weekly.
Mid-term Milestones (within 2-years)
1. Work out a weekly budget – Work out what you spend money on weekly, and then cut out any unnecessary purchases. This will allow you to save more, faster.
2. Save $20,000 – This means depositing $192 a week into your home savings account weekly.
Long-term Milestones (within 5-years)
1. Find ways to save more – Sell any unwanted items. Sell larger assets, such as a car. Move in with family for 12-months.
2. Save home deposit and stamp duty – Deposit funds from the sale of items into your home account, along with your weekly savings.
Lastly, it’s important to track your progress. This way you make yourself accountable and it allows you congratulate yourself when you reach milestones. Progress tracking can be as simple as checking your home loan bank balance weekly, and if you’re not on target then rectifying this problem.
Are you thinking of buying a home? Then contact eChoice and find the right home loan for YOU today.