Research shows that it may be cheaper to buy than to rent, but a lot of first home buyers are struggling to save a deposit.
Finder home loan editor, Richard Whitten says that it isn’t always in your best interests to buy.
He says: “Almost one in three Australian homeowners say they are struggling to meet their mortgage repayments, according to Finder’s Consumer Sentiment Tracker in April.
Finder analysis shows it is also increasingly difficult to save for a home deposit and that prospective homebuyers in Sydney would need to give up 52,191 takeaway coffees to save enough for the average deposit.
How to get a deposit together
Mr Whitten says: “People often fixate on cutting back on the small luxuries like coffee and takeaway. Obviously those expenses can add up over the long term, but with the required deposit for a house being so high, buyers are better off focusing on major changes that they can manage.”
He suggests renting a cheaper place, somewhere smaller or in a more affordable suburb, or even moving back in with your parents if you’re able to. That can have a massive impact on your ongoing expenses and your ability to save.
It’s worth considering revising your property aspirations.
“Some buyers may find that scaling back on their property goal is the best way to make the purchase more affordable. This could mean opting for a unit over a house, or even considering buying in a regional centre or interstate. If you’re in Sydney and decide to relocate your budget suddenly goes much further.”
If you are struggling to get a deposit together you could consider asking for the support of a guarantor, usually a parent, who owns a property. They can provide additional security on a mortgage if you can’t save the full 20%. The drawback is that if you default on your repayments they are liable for them so it’s a big decision to make.
Lastly, Mr Whitten says: “When you’re ready to buy, choose a home loan that won’t cost you more than you need to spend. There is still competition in the mortgage market right now, and if you compare first home buyer home loans to get a cheaper deal, you could save thousands over the loan term.