Saving up for a house is a daunting task. Unless you’re made of money or happen to win the lotto, chances are you’ll have to painstakingly scrimp and save for a few years to afford enough for that elusive 20% deposit.
But you can be smart and find ways to cut the costs of buying a home. Here are a few clever ways to save money on your mortgage costs.
Don’t settle for the very first home loan you find. There are so many different home loan types, like fixed, variable, interest only, etc. Make sure you shop around, compare and do your research to find the best home loan that suits your needs.
Don’t forget to consider the comparison rate when looking at home loan interest rates. The comparison rate is basically the ‘true cost' of the loan and factors in any extra costs or charges that come with the loan. Some people forget to factor this in and only look at the advertised rate.
You can take advantage of discounted rates, like our 1.99% p.a. Smart Booster Discounted Variable Home Loan (2.47% p.a. comparison rate). The low 1.99% p.a. rate applies for one year before reverting to a rate of 2.57% p.a.
Eliminate Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance (LMI) can be an expensive cost to fork out for if you don’t have a 20% deposit. You can avoid this by making sure you have a 20% deposit saved up - this will be even easier to save for if you’re buying a cheaper property.
You can also avoid the cost of LMI by applying for the Federal Government’s First Home Loan Deposit Scheme. There are only 10,000 places each financial year, but recently the scheme has been extended to allow a further 10,000 first home buyers to enter the scheme from October 6 until June 30, 2021 - on the condition they are purchasing a newly built property.
Expand your property search
If you’ve got your sights set on a particular suburb but it’s a bit beyond your budget, consider expanding your property search by a kilometre or two. These ‘bridesmaid suburbs’ have just as much to offer but usually at a cheaper price (and cheaper council fees).
When you’re looking at properties to buy, compare properties in the area and don’t be afraid to negotiate prices if you think the seller is being unrealistic. You can find out what similar properties are going for in the area by browsing real estate listings, going to auctions or using RP data and use this information to your advantage when negotiating on price.
Slashing a few thousand dollars off the asking price can contribute even more to your savings, which you can then stash into your home loan’s offset account.
Put savings into an offset account
When you’re hunting for a home loan, consider getting one that has an offset account. An offset account basically acts like a transaction account and all the money that’s in it it ‘offset’ against your home loan debt when the interest is calculated, reducing the amount you owe.
Can’t decide what type of home loan is best for you? Speak with one of our home loan specialists today to go through your options and get pre-approval.