How Much Do I Need to Buy A Home?

The Australians are looking at the property market with eager eyes because of the record low interest rates these days. So, how much to save and how much to take loan? This question comes in everyone’s mind who is looking to purchase a property. After all, opting for a mortgage or lease to buy a property is not a simple thing but requires lifelong commitment. On average, it takes 25-30 years to pay it off.

When you are buying a house for the first time, it is important to learn how much you need to save for upfront cost of your house. Well, it is actually possible to start looking for a house once you have saved 5% of the purchase price, through Lenders Mortgage Insurance you can pay larger proportion of your purchase price too. This loan can be spread over the term of your loan or can be included in your upfront amount. So, to put it into tangible figure, you could hypothetically borrow $500,000 with a deposit of $25,000.

Looks so cheap!!!

But it is not that simple, this loan with deposit of just 5% comes with lots of complications and risks. For example, to get this loan you need to have good employment record and a strong credit history. Besides, as the loan is long term, interest rate and market fluctuation would always be there.

Thus, it is better to rely on the advice of banks and financial institutions. In this case, you may have to save 20% of the prospective property purchase price, like for a house costing $500,000 you need to have saved $100,000. Though it will take longer for you to save that amount but you will end up paying less money in interest and would not require paying insurance cost or needing a guarantor.

When buying a house, you have to keep in mind that there is also a range of other costs to consider which include legal costs, land title and registration fee, insurance, etc. Though these costs are not significant relative to the actual price of the property but once added up to actual price, they affect the total cost enormously. Thus, it is important that you keep an account of these costs in your budget, especially if you are planning to invest in multiple projects.

Another major expense which comes your way of purchasing a property is the stamp duty. It is a onetime charge that is paid to the Government for the transfer of property. It varies from state to state and the type of the property you are buying. Stamp duty must be paid within 30days once the settlement is finalized.

As always, the final decision lies with you. Keeping your situation in front only you know what works best for you in the long run. But when it comes to a long term financial commitment, no one should make any hasty decisions.


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