October 29, 2010
New research from Datamonitor shows that 7 percent of Australians surveyed plan to purchase their first home by September 2011. It’s safe to assume that rates will rise over the next 12 months; this week’s rate rise of 25 basis points, and the Commonwealth Bank’s 45 basis point rise, probably won’t be the end of the section. So if you are If you are a first home buyer who has a goal of buying your dream property next mortgage season, here are some points on what you should do now to better prepare yourself.
The first and most important step is to set a budget and start a savings plan. Take Karen and James for instance, with a budgeted purchase price of $300,000 combined. For a deposit together they have saved $15,000, however we recommend you aim for 10 percent of the purchase price to cover costs. If the couple saved $1250 a month over the next 12 months they could save the extra $15,000, totalling the $30,000 required.
Also consider depositing this money into savings account that will earn you more in interest. If James and Karen transferred their $15,000 they have into one of the best online savings accounts listed on RateCity, 6.51 percent by UBank, and continued adding $1250 each month through an automatic savings plan, they would reach their $30,000 goal in 11 months, and earn nearly $1300 in interest (if the rate remains the same).
The best way to find a great savings account is by shopping around and comparing savings accounts online at comparison sites such as RateCity, which will help you save for your deposit sooner.
Start researching home loans to not only understand the concepts, how they work and different fees and charges involved but also so that you find what type suits you. For instance the two main types of loans available are fixed-rate home loans and variable-rate home loans.
Fixed-rate home loans offer a fixed interest rate for a specific term, usually from one year to 10 years. During this time your rate is locked in so your repayments are the same, which makes it easier to budget for. At the end of this time your rate will then revert to a variable rate for the remainder of the term.
Variable-rate home loans are a type of mortgage where the interest rate can fluctuate, making it harder
to budget for as your repayments may change. The interest rate is usually lower than fixed loans at the time the loan is taken out, but that can obviously change over time.
Throughout the whole process it may be beneficial to monitor the property market to get a feel for pricing. Also, look around and choose the suburbs you’d like to live in so when you are ready you know what areas to look in and what areas meet your price range.
About two to three months before you’re ready to buy you should compare home loans online at RateCity to make sure you are getting the best deal for you. Look for a loan with lower fees and a lower interest rate to help you save and pay your dream home off sooner.