When you’re saving for a place on your own, it can feel like a hard slog to grow a deposit. But it is possible! It may mean some short term sacrifices, however, property prices are down in a number of cities, and interest rates are still low so it can be a good time to get into the market.
Here’s what you need to know about buying solo.
How’s your borrowing power?
As a solo buyer, it’s important to have a clear idea of your borrowing capacity. This can shape what – and where – you can afford to buy.
Your borrowing power hinges on several factors, chiefly your savings and deposit as well as your income, living expenses and other financial commitments.
Your income is especially important as it determines if you can meet your home loan repayments as well as the other costs of owning a home such as maintenance, rates and insurance. Remember, you won’t have a co-owner to share these costs with you.
It may be possible to give your income an uptick with a second job however there can be other ways to improve your borrowing capacity.
As a guide, you may aim to pay off all, or at least some of, your other financial commitments such as personal loans and credit card balances, which can free up extra cash to grow your deposit.
It’s a good idea to speak with your Aussie Broker to know exactly what your borrowing power is before you start looking for a place you’d like to buy. The sooner you meet with your broker, the more informed you’ll be at an early stage of the buying process.
Struggling to meet a 20% deposit?
The bigger the deposit you can save, the lower your loan repayments and interest charges are likely to be. So there’s a good incentive to keep growing your savings. Remember too, the First Home Owner Grant may also count towards your deposit.
You could look to review your budget to find areas where you can cut costs to help grow your savings. It may mean giving up some luxuries but it doesn’t have to be for forever. Aussie’s Budget Planner can be a big help here!
While lenders like to see evidence of regular saving, growing a 20% deposit can be big effort if you are buying on your own. Some lenders provide home loans with as little as 5% deposit – though it will usually mean paying lenders mortgage insurance (LMI).
If you can provide a guarantor – usually a close relative, for your home loan, you may be able to secure a loan without paying LMI, even if you have just a small deposit.
A home loan expert can explain how these different strategies could work for you. This highlights the value of speaking with your Aussie Broker at an early stage to plan for your home purchase.
Are you thinking about buying solo? Why not make a free appointment with an Aussie Broker today?
You may also be interested in: Mortgage brokers – definitely worthwhile, The path to buying a property and Investor, refinancer, home owner: Beau’s property journey