How to Budget for Your First Home Purchase

Understanding the Importance of Budgeting for Your First Home

Purchasing your first home is an exciting milestone, but it can also be a daunting process, especially when it comes to budgeting. A well-structured budget will help you navigate the financial landscape of buying a home in Australia, ensuring you make informed decisions and avoid potential pitfalls.

Assess Your Financial Situation

Before diving into the home-buying process, it's crucial to have a clear picture of your current financial standing. Here are some steps to assess your finances:

• **Calculate Your Income**: Include all sources of income, such as salary, bonuses, and any side income.
• **Track Your Expenses**: Keep a record of your monthly expenses, including fixed costs (rent, utilities) and variable costs (groceries, entertainment).
• **Determine Your Savings**: Assess how much you have saved for a deposit and other home-buying expenses.

Set a Realistic Budget

Once you have a clear understanding of your financial situation, it’s time to set a budget for your home purchase. Consider the following factors:

#### 1. Deposit Savings

In Australia, homebuyers typically need a deposit of at least 5% to 20% of the property's purchase price. A larger deposit can reduce your loan-to-value ratio (LVR), which may help you avoid lenders mortgage insurance (LMI).

• **Example**:
• For a $500,000 home, a 5% deposit would be $25,000, while a 20% deposit would be $100,000.

#### 2. Additional Costs

Don't forget to factor in additional costs associated with buying a home, which can include:

• Stamp duty: Varies by state; first home buyers may be eligible for concessions or exemptions.
• Legal fees: Costs for conveyancing and legal advice.
• Building and pest inspections: Essential to ensure the property's condition.
• Moving costs: Expenses related to relocating your belongings.

#### 3. Ongoing Expenses

Once you own a home, ongoing expenses can add up quickly. Consider:

• Mortgage repayments: Use a mortgage calculator to estimate monthly repayments based on your loan amount, interest rate, and loan term.
• Council rates: Varies by local council and property value.
• Insurance: Building and contents insurance to protect your investment.

Finding the Right Mortgage

After establishing your budget, the next step is to explore your mortgage options. Here are some tips:

• **Research Lenders**: Compare different lenders and their products to find the best fit for your needs.
• **Consider Government Grants**: First home buyers may be eligible for various government grants and assistance programs. Check the specifics in your state, such as the First Home Owner Grant (FHOG) or the First Home Loan Deposit Scheme (FHLDS).
• **Get Pre-Approval**: Before house hunting, consider applying for a mortgage pre-approval. This will give you a clear understanding of how much you can borrow and streamline the buying process.

Create a Home Buying Timeline

Setting a timeline can help you stay focused and organised throughout the home-buying process. Consider the following stages:

1. Saving for a Deposit: Set a target date for when you want to have your deposit saved.

2. Researching Properties: Allocate time to research the property market in your desired locations.

3. House Hunting: Plan to spend several weeks or months visiting open houses.

4. Finalising Your Purchase: Allow time for negotiations, inspections, and legal processes.

Frequently Asked Questions

#### What if I can’t save a 20% deposit?

While a 20% deposit is ideal to avoid LMI, many lenders offer options for those with smaller deposits. You may be eligible for loans with a 5% deposit, provided you can demonstrate your ability to repay the loan. Keep in mind that LMI may apply if your deposit is less than 20%.

Conclusion

Budgeting for your first home purchase requires careful planning and consideration of various factors, from your current financial situation to ongoing expenses after the sale. By taking a structured approach, you can ensure that you make informed decisions and set yourself up for success.

If you would like personalised advice tailored to your unique situation, please speak with Timothy Yang at Northmark Finance. He can help guide you through the mortgage process and assist you in making your dream of home ownership a reality.

*Disclaimer: This blog post is general information only and does not constitute financial advice. Please consult a qualified professional for personalised advice tailored to your specific circumstances.*