As a first home buyer, you might not be able to get out to open homes and auctions at the moment, but that doesn’t mean you shouldn’t be doing all you can to preserve the home deposit you’ve worked so hard to save.
With some commentators predicting that house prices could fall by as much as 20%, you want to be in the best possible position when the housing market kicks off again after the coronavirus crisis has passed.
It’s all too easy when you’re stuck at home to get carried away with online shopping, and spend up on clothes, cosmetics or electronics, or whatever else takes your fancy. And watch out for Uber Eats!
But there are a couple of good reasons why you should resist the temptation, says UNO mortgage advisor Paul Sealey.
The first is that you risk reducing the size of your home deposit, which could ultimately limit how much you can spend on a property.
Secondly, one of the criteria lenders look at when deciding how much you can borrow is your monthly spending habits. This could mean that the more you spend, the lower your borrowing capacity.
Banks typically look at the past three statements, so you want to ensure your spending doesn’t creep up while you’re stuck at home.
“Purchases that you don’t need but are essentially buying out of boredom can be taken into account when the bank looks at your loan application,” says Sealey.
If you’re stuck at home, why not use the time to go over bank and credit card statements to look at your monthly expenses and consider what are necessary purchases and what you can cut out. One easy area to save a few dollars is to check your subscriptions – are you paying for a streaming service you don’t watch or an internet site you don’t visit anymore?
Look at how much you spend on regular expenses such as electricity, gas, phone, internet and insurance. See what sort of deals other companies are offering and then contact your suppliers to see if they can offer you better rates or switch companies.
Not only will you save a bit more by cutting back on your regular expenses, when it comes time for a bank to assess your loan application, your borrowing capacity will be higher because your expenses are lower.
“Little things like this could actually increase your borrowing capacity quite a lot,” says Sealey.
In fact, you are lucky enough to still be earning your full income or close to it, now could be a chance to save more – after all you won’t be going out to restaurants or the cinema.
If you follow these strategies, you can get closer to being in great shape for buying your home when the housing market takes off again.
Saving is the first step to getting on the property ladder, but there are also so many other things you need to know. Our team of brokers get asked all sorts of questions, like how much deposit do you actually need to buy that dream home? What’s a safe amount to borrow from the bank? What is lender’s mortgage insurance? Could I be eligible for the First Home Owner Grant?
We’ve compiled a helpful toolkit for First Home Buyers that answers all these questions – and more – to help you make sure you’re informed and in the best position possible when you’re ready to make the leap and buy your first home.
Start your journey here, with UNO’s Guide to Buying Your First Home
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