Saving and your deposit

Your credit record is more important than you think

If you're planning to buy a house, it's a good idea to check your credit file. Because when you apply for a home loan, lenders will be casting their eyes over it too.

They'll be looking up:

• Obvious personal details such as your name and current address, your employment details, and directorships.
• Credit applications you've made in the past—such as for credit or store cards—and to see if you've defaulted on payments, or have an 'infringement' to your name.

Over time, your credit records are updated and deleted. Applications and defaults disappear after five years, and serious infringements and bankruptcies go after seven years.

You can find out more information on how to check your credit report on the Australian Securities and Investments Commission website.

If you live in Tasmania you should also contact the Tasmanian Collection Service.

Why you need a deposit

When you're looking for your first home, you need to know how much you can afford to pay off each month on your home loan. That will help determine the size of the loan you can get, and therefore what property you can buy.

The deposit that you can put down is just as important. Here's why:

100% loans typically no longer exist

Generally it's no longer possible to get a loan for the whole of the purchase price. Most lenders will want you to put down at least 5% of the purchase price of the property. The rest—generally up to 95%—can be 'financed' using a home loan.

You get access to lower interest rates

If you can put down a deposit of 10%, this will often get you a lower interest rate on your loan, because there is less risk involved for the lender.

Avoid paying Lender's Mortgage Insurance

If you can put down a deposit of 20%, you might be able to avoid paying what's known as 'Lender's Mortgage Insurance' (LMI).

Pay less in the long run

The more you can put down as a deposit, the less you'll have to borrow. That means you'll pay less in interest over the lifetime of the loan, and your repayments will be lower over a set term. Use this Loan Repayment Calculator to see the kind of difference it makes.

More loans to choose from

A bigger deposit also means you'll get more loans to choose from. Which makes it easier to get a good deal on the right loan, and save even more in the longer term.

Something for nothing: the First Home Owners Grant and Boost

The First Home Owners Grant (FHOG) is a one-off tax-free Federal Government payment of up to $7,000 to anyone buying a first home in Australia.

Getting the FHOG

The state and territory governments hand out the grants on behalf of the Federal Government. They may also offer additional bonuses for first home-buyers like stamp duty concessions and extra money. Ask an Aussie Mortgage Broker about the perks and lurks that you should know about, or take a look at the website of the revenue office in your state or territory:

ACT | NSW | NT | QLD | SA | TAS | VIC | WA

More good news: First Home Savers Account

If you're a first home buyer, the First Home Owners Grant isn't the only financial bonus you can get.

The Federal Government will also add extra dollars to your savings when you set up a first home savers account.

Each year the government will make a 17% contribution on amounts you deposit, up to $5,500 per year. This means if you deposit $5,500 in one financial year, you will receive $935 from the government. Some of the main features of these accounts are:

• You have to save at least $1,000 each year over at least 4 financial years before you can withdraw the money. These 4 years do not need to be consecutive.
• The maxium account balance is capped at $80,000 but this cap will be indexed in future years. After your savings reach this level, only interest and earnings can be added to the balance.
• The money has to be used for your first home. If it is not, it is added to your super and you can't access it until you are retired or can meet another condition of release.
• If you buy your first home before the 4 year period is up, you can withdraw the money in your account at the end of the 4 year period to put towards your mortgage.

We've created a calculator to show how you can build a healthy deposit using one of these accounts.

Continue to information about choosing the right loan and considering the costs.