ok, so we want to start saving for a house deposit. starting after xmas, when our BB installments stop, and we have to re-evaluate our income & budget. for the time being, we're just paying the bills and getting me started with my WAHM venture
We need an account that we cannot touch, for say 3 years? i would be making fortnightly deposits, and also considering depositing the money i make from WAH, which varies depending on how much/what i sell (its all craft stuff)
how much is considered 'good enough' i understand that the more we have, the less we have to borrow. we wouldnt want much more than $300,000, if that. from my calculations, and if we stick to it, we would have $7000 in the 3 years. would that be enough to go ahead with applying for loans?
It depends.... Most paces expect a 10% deposit but it depends how desperate the buyers are to sell and whether or not a bank will let you go ahead. Up here it's a 3% deposit in Canberra but 10% in Yass... some people get away with 1% deposits... it really depends on the bank etc...
we are doing the same thing ATM, we have been told by the com bank that to get a loan you need 10% deposit so if your looking at 300k then you will need 30k deposit, BUT if you have a exsiting loan or credit card with the com bank then you only need 5% deposit, so you would only need 15k... we got told the best thing to do would be get a credit card with them with a $500 limit , cut it up so that you dont use it... then after 6mths with the card you are able to apply for the loan and you only need 5% if that makes any sence...
but in three years the GFC should be over and the world should be on the up again so you might be able to get a loan with next to nothing again...
Also remember if you are borrowing more more than 80-90% (ie your deposit is less than 10-20%) the bank/lender will require you to pay lenders mortgage insurance. This is usually a few thousand depending on the size of the loan. It is not insurance that covers you, it covers the bank if you default on your loan.
Then you also need to fund stamp duty and loan application fees etc on top of your deposit, so don't forget to factor in that too. If you're a first home buyer though, you'll get the first home buyers grant (assuming it is still around then) and this could cover some of the costs and deposit.
Yep, it's 10% in WA for a bank to look at lending you money... UNLESS you have someone to go Guarantor for you that does have that sort of money or equity, then I think you can get away with having nothing saved up.
And yes, don't forget about the stamp duty fee's, loan application, settlement fees and all that other fun stuff! ><;
I've found that the banks are really cracking down at the moment, and unless you have 20% deposit - they're turning more people away than accepting them.
Hopefully in 3 years time, they will be back to lending you money with 10% deposit - 10% is good, you don't really want one to lend you everything as their interest rate is usually much higher than a standard bank, PLUS, if you were to refinance they chuck on a BIG penalty for you. SO you are usually stuck with it for at least 3 years before you can refinance - which can end up being a lot of money in wasted interest that you need not be paying IYKWIM?
When we got our first house - we had nearly 20K saved up, and we got a loan for 250K not a problem.
And yes, don't forget to factor in stamp duty and legal fees (including searches).
If you are serious about saving for a house and not touching the money then google first home saver account sponsored by the Govt. There are tax advantages and they also make contributions to your savings as well (which makes it grow faster).
+1 to Muppity. DH and I have a FHSA each. Convenient for us, as contract-wise, we don't want to buy for three years anyway, so if Kevvy Rudd wants to pay us 17% not to do so, we can't say no! There's a few conditions, but it's actually less restrictive than many people think.
You're not locked in for 4 years - you have to contribute in 4 separate financial years, but can mean say 30 June 2009-1 July 2012.
Our bank pays their highest interest rate for an online saver, as well as the govt contribution.
If you decide down the track that you're not going to buy, the money gets rolled into your super, which is where it should be going, if you're not buying
You really really can't touch it. It's not like the online save where "you can't touch it" (but all you need is net access, and you can. You really can't get at this one.
snuggley bean, i just checked out DP's bank (credit union) they have FHSA, but you have to have one each. i didnt quite understand it though, does it mean we would have to have a loan through them?
i had a look at my banks website (Westpac) and there doesnt seem to be an account that we can't touch.. the term deposit account says $5,000 opening balance.
As most have already mentioned, its usually a 10% deposit (I work for CBA and this is our case - I have not heard of the 5% deposit for those with a credit card though - so might need to just double check that with the Bank again Green Tree Frog - I'll also check my next work day).
The 1st 5% of that 10% deposit must be geniune savings, but you can use up some of the FHOG for the remaining 5% (though as already mentioned don't forget you'll need extra for legal and government fees as well - this is where most of my FHOG went when I bought many years ago). The more deposit the better, as the Bank will lend up to 80% of the property value without mortgage insurance (if you have less then the 20% deposit the mortgage insurance is capitilised onto the loan though).
Also if your employment is going to be self employed, you usually need 2 years financials - so keep these up to date, otherwise if you have to do it as low doc you'll then need a 20% deposit (if your banks anything like CBA).
As mentioned the FHSA is an option, but since they've been at our bank, even though I have had a few clients ask about it, noone has actually opened one yet, mainly because they cannot access it if they needed (even if it was an emergency). In regards to whether you'd have to apply for the loan through that bank, I'm not sure - I'll have to check at work, as I can't seem to find it on the PDS, but it does say you can transfer the fund to another institution's FHSA.
Also last option, depending on how close you are to your family, but using your family's equity can also be an option, but the bank would then use that family members (usually parents) house as security so that you can borrow the full 100% of the property value, but your family need to be aware that if things go wrong, either yours or their house could be sold (which ever sells first pretty much). This family equity wouldn't be forever though, as once your property built enough equity (possibly after 2-3 years, depending on house price rises) you could then refinance and remove them off.
One way to force savings is to defer Family Tax Benefit A or B or both. That way you will get a lump sum payment. I know this might not be an option ATM but maybe think about it in the future?
thank you so much for your advice everyone! much appreciated! i think we will need a bit more than what i worked out, so we'll see how we go! need to start somewhere/sometime i guess!
Only really reiterating what others have said, but from personal experience with St George, you will need 10% or 5% if you've had a savings account for 12 months. We bought our first home in March, and I think we were the lucky last to get a 100% loan.
i think you'll find the days of getting 100% finance are well and truely over, unfortunatly thats what started the finacial crisis in the first place in the US.
i think saving your FTA and B is a fantastic idea, goodluck hun, you'll be a home owner before you know it!
where to start? house deposit.
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