Even though many first home buyers can access schemes that allow for a lower deposit, banks still want to see that you can build "Genuine Savings." This demonstrates your ability to manage money and indicates that you'll be a reliable borrower.
What Are Genuine Savings?
Genuine savings are funds that have been built up and saved in a bank account over a minimum period of 3 months. This must equate to no less than 5% of the value of the property you intend to buy.
Example: If you are looking to buy a property at $500,000, you would need to demonstrate savings of $25,000 over a minimum 3-month period ($500,000 x 5% = $25,000).
Important Points About Genuine Savings:
- Account in Your Own Name: Your savings must be in an account held in your name.
- No Large Lump Sum Deposits: Banks will question lump sum deposits and typically not consider them genuine savings unless held for at least 3 months. This includes money from selling personal items or tax returns.
Action Plan:
- Set Clear Goals: Determine how much you need to save.
- Create a Budget: Use a monthly budget planner to track income and expenses.
- Automate Savings: Set up an automatic transfer to a separate savings account on payday.
- Cut Unnecessary Expenses: Review and reduce spending on non-essential items and services.
- Meal Prep: Save money by preparing your work lunches. It’s easy to spend $20 a day, which adds up to over $5000 a year.
- Shop Smart: Look for cheaper deals on regular expenses like insurance and mobile phone plans.
- Check Out Government Schemes: The First Home Buyer Saver Scheme can help you save within your superannuation.
Building genuine savings not only helps you secure a home loan but also shows that you are financially disciplined. By setting goals, budgeting, and cutting unnecessary expenses, you can demonstrate to lenders that you’re ready for the responsibility of homeownership.
Ready to take the first step toward home ownership?
Buying your first home is a big step, but with the right preparation and knowledge, you can handle it with confidence. Every situation is unique, so feel free to reach out for a no-strings-attached chat to talk about your specific needs.
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