Could 2018 be your year? The year you finally crack the property market?
Market trends and property data will only get you so far; first, you need to be in a position to part with the cash.
Paul Thomas, CEO of Gateway Credit Union, shares how high-interest savings accounts, paying down your debt and obtaining a good credit score could help you get into property numero uno before the year’s out.
Let’s approach this step by step.
Let’s be real if you’re saddled with debt it’s unlikely you’re going to be able to save for a home.
Paul says reducing any debt – from personal loans to those you incur on your credit card – can help you in more ways than one before purchasing a home.
“It puts you in a better position as a borrower when you apply for a home loan,” he says. “Lenders will assess you on a range of factors, and your debt level is one of these.”
“The less debt you have, the more cash flow you’ll also have to put towards mortgage repayments. It’s simple: The less debt you have, the better position you’ll be in financially.”
When saving for a deposit, it’s crucial to not only pay down your debt but to have a regular savings plan, Paul explains.
“Saving a deposit doesn’t happen by accident – you have to be organised and consistent,” he says.
The first step is to analyse your finances and work out a budget.
“A budget should help you identify where your money goes in any given month and where you can make small cost-cutting measures,” Paul says.
“This will also allow you to have a realistic idea of how much you can put away every week,” he adds.
Debt-free and fancy-free? Not a chance.
Once your hard-earned is going into your bank account – not your credit card – it might be tempting to spread your wings a bit.
Well, rein it in, because it’s actually a much better time to start building up your genuine savings.
You might have heard the terms ‘high-interest savings account’ and ‘term deposit’ float around before, but how can these actually help you?
“High-interest savings accounts and term deposits are intended to boost your savings by offering interest on the money you hold in them,” Paul says.
“Unlike an everyday transactional account, these products generally have no account-keeping fees.
“A term deposit also provides the added benefit of locking your savings away for a specified term, which means you’re less tempted to dip into your savings for impulse purchases.”
If you’re looking to build a deposit for a home, these types of products could provide a huge helping hand. Essentially, they make your money work harder by earning interest on your savings, helping you to boost your savings more quickly.
If you’re not confident you’ll remember to regularly deposit money into your new savings account, Paul says you could look into setting up a direct debit from your everyday account to your savings account.
What the heck is a credit score, we hear you ask?
Essentially, it’s a number that is calculated based on the information in your credit reports that lenders will use to determine your reputation as a borrower. The higher your score, the more attractive you could seem to potential home lenders when applying for a loan.
“Lenders may use this information to decide if lending you money [to buy a home] is worth the risk,” Paul says.
“Things like the type and size of credit you request on your loan applications; paying your bills on time; not applying for too many credit cards; paying off outstanding loans and credit card debt, or your employment history can all impact your overall credit score,” he says.
If you haven’t ever looked up your credit score, now is the perfect time to do it.
You’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies, such as Equifax, Dun and Bradstreet and Experian.
If the number comes back high – congratulations. You’re one step closer to that #dreamhome.