Questions To Ask When Saving For Your First Home

September 2020 – 7 minute read

Key takeaways from this article:

There’s nothing more exciting than buying a first home. It’s one of the biggest purchases you’ll ever make and one that will change your life.
 

So it’s normal to have a few questions about how everything works. And when you’re asking more questions than you’re getting answers, it’s normal to feel stressed or anxious. But it’s never too early to start reading up on things like saving for a house deposit or how much you’ll be able to borrow. The more you know now, the sooner you’ll be moving in. 

How much do I need to save?

It’s a good idea to aim for 20% of the purchase price, plus a bit extra. If you know the area you’d like to buy in, have a look at property listings to get a sense of the average house price. And don’t be afraid to start small – you could always move to something bigger later on.
 

Be aware there can be a difference between a property’s market value and its bank valuation. If the bank valuation is lower than the current market value, you may need to add more to your deposit to make up the difference.
 

House prices vary by region, but the ABS has stated Australia’s average house price was $690,200 in the June 2020 quarter. This means you could need to save a deposit of approximately $138,040 (excluding additional costs) to avoid paying Lender’s Mortgage Insurance. 

If you have between 5% and 20% of the property’s value (which is based on your lender’s valuation of the property), you can still put down a deposit, but you may need to pay Lenders Mortgage Insurance. This lets you borrow a larger percentage of the purchase price and can either be paid up front or be included in your loan repayments, so it’s spread out over time.
 

How long will it take to save a deposit?

Real talk: saving a deposit for a home takes time. On average, first-home-buyer couples in Australia take 4.6 years to save a 20% deposit. If you’re in Sydney, it takes a lot longer.
 

Whatever happens in the market in the next few years, you’ll thank yourself later if you start saving now.

How much can I borrow?

You can work out how much you can borrow for a home loan by using a borrowing calculator. You’ll be asked to input information like your income, financial commitments and whether you have any debt. It will then give you a guide to your potential borrowing capacity.  
 

Home loan calculators are just a guide, but they’re good for giving you a ballpark figure. When you’re ready, you can visit your local Westpac branch or request a call back to get more detailed information.

What else do I need to budget for?

There are a few other costs you need to anticipate when buying a home. These can include: 

1.  Stamp duty

Stamp duty is a broad-based tax applied to different types of transactions by the government. It’s also sometimes known as “land transfer duty” when it’s applied to property purchases. The amount of stamp duty you’ll pay is variable, depending on the type of property you’re buying, whether or not you’re a first-home buyer, and if it’s an established home or a new build.

Westpac stamp duty calculator

2.  Lending fees

“Lending fees” is an umbrella term for the different fees you’re required to pay upfront when buying a home or property. They include:
 

• Application fees, which cover the cost of drawing up documentation for your loan
  
• Valuation fees, which help the lender ensure you’re borrowing an appropriate amount for the cost of your property
  
• Conveyancing fees, which cover the cost of transferring the property’s title to the new owner
  
• Stamp duty

3.  Inspection fees

Inspection fees, such as building and pest inspections, aren’t included in the costs associated with your loan as they’re generally optional extras completed prior to the final sale.

4.  Legal fees

Unless you’re a legal eagle, you’ll likely need help from a conveyancer or solicitor to prepare your home loan. Their fees for advice and document preparation vary depending on your lender and the size of your loan.

What about how to save money?

A great first step is creating a budget and savings plan. Add up all your expenses and work out how much of your income is left after you’ve paid them. Next, you can decide on a realistic percentage of your total income to save. Remember: saving for a home is a marathon, not a sprint.

The Westpac Life account allows you to set and prioritise savings goals. That means you can dedicate your account entirely to saving a house deposit, or save for both a deposit and that much-needed holiday at the same time. To make things easier, you can set regular transfers from your linked Westpac Choice account.