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If you’re weighing up whether to save up for a house deposit or pay off all your outstanding debts first, start by assessing your financial position in life, and work from there.
Taking out a loan to buy a house is a big investment and a lifetime commitment. If you want to borrow from any bank in Australia, you'll generally need a minimum of 5% of the property's purchase price to put down as a deposit.
Although most buyers will aim for a 20% deposit in order to avoid paying Lenders Mortgage Insurance (LMI).
Though there are other ways of getting a loan, it always helps to have as large a deposit as possible to help reduce the amount of interest paid on the home loan over the full loan term.
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The answer here really depends on how much debt you have but generally the rule of thumb is try to pay off your existing debts first.
Especially if you have more than 5 percent of the price of the property in unsecured debts such as personal loans, car loans, credit cards etc., then it’s a good idea to take care of those commitments first before you fully concentrate on saving up for a deposit.
No matter the size of your deposit, there's always a way to owning your dream home. Find out about low deposit home loans today.
Getting your finances in order shouldn’t be difficult, but for many it can be tricky to figure out where to start or what to focus on first. Here are 4 steps you can take to kickstart getting your finances in order:
The first step is to stop borrowing more money. You don’t want to add to any debts you already have, as this will only cause your financial position to decline. If you want to save enough money to buy a house, you will need to make some sacrifices. These include ignoring the urge to buy expensive items until you’ve saved up enough for a deposit.
Pay off one debt at a time. Start by paying off the debt charging the highest interest rate first. Make sure to pay all your credit card bills on time, because defaulting can affect your ability to get approved for a home loan. Gradually make payments on your debts. Set out a plan to pay off your high interest debts first and then look at ways you can reduce your outgoings to save more money.
Open a high interest savings account. After you’ve paid off your high interest debts, switch to actively saving in order to gather the 5% deposit for your home loan.
Check if you're eligible for a grant. Some state governments in Australia offer grant and stamp duty exemption for first home buyers. If this is applicable to you, talk to one of our Home Loan Specialists to see if you can access these options.
Keep your savings account separate. You may want to think about saving up the money in a separate savings account with higher interest rates and fees for withdrawing. This will deter you from withdrawing money to buy day-to-day things.
If you’re interested to know more about financial planning for home loans, then talk to our team of experts and find out the best way to go about saving for a deposit.
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