Mortgage Down Payment
or House Deposit
A mortgage down payment, or a house deposit, is the key for first home buyers to start on the property ladder.With the change in the global economy in recent years it is probably not going to be possible to purchase your property with no down payment or house deposit. PLEASE NOTE: This information about mortgage down payment is intended to get you thinking about what money you need to buy a house, it is not intended to replace professional mortgage broking, financial or banking advice.
How Much Will I Need?
The amount of money you need to have available, as a house deposit or down payment, to secure a mortgage will depend on a number of factors.The bank, or lending institution, will dictate how much they are willing to lend you. The balance of the property purchase price will then need to be made up by you. For Example:
You want to buy a house worth $200,000.
The bank agrees to loan you 80% of the house value or $160,000.
You need to have a deposit or downpayment of $40,000.
How To Get The Money For A House Deposit
Buying a house is often a long process.It is not the process with the bank that takes the time, but rather the preparation to make sure you are in a good position financially when you find the house you want. It can take years of saving before you are ready to get a mortgage and buy a house. There are many ways to prepare, and with commitment and planning you should be able to reach your goal of home ownership. KIWISAVER In New Zealand the Kiwisaver House Deposit scheme is another way to save for your House Deposit. Learn more here.
It May Not Be Easy
It is generally acknowledged that the cost of living and the costs of purchasing a home have increased significantly in the past couple of decades. Do not let this discourage you. It is still possible, but you may be someone who has to be more determined and creative than the next person to achieve your goal.
Ways To Save For Your House Deposit Or Mortgage Down Payment
Not everyone has a lot of discretionary income that they can suddenly choose to save for their house deposit.In fact, most people will need to make adjustments (sometimes significant adjustments) to their lifestyle and spending to start increasing their savings. Often the difference between spending and saving comes to down to choice and necessities. If you are able to make the decision that you do not need something, then you can choose to put that money into savings. Keep in mind the whole time you are making changes that it will ultimately be for your benefit, so that you can buy your first home. Some Examples: Eating out or takeaway food - is it really necessary? If you prepared the meal at home, or purchased something from the supermarket you would probably spend less. Cigarettes - this may be a harder one to cut out quickly, but the financial benefits of stopping smoking can be really huge.Outings - do we need to drive to another town or area? Could we do something simple and close to home that saves on gas? Do we need to pay for an activity or could we spend some quality time with family and friends that cost little or nothing?Shopping - do you really need that item you are thinking of buying, such as a new dress, TV, lounge suite, cushion? Can you survive without buying it? Could you buy second hand instead of new to keep the cost down?THESE IDEAS ARE JUST THE TIP OF THE ICEBERG TO GET YOU THINKING. AGAIN, ALWAYS KEEP IN YOUR MIND THAT YOU WILL ULTIMATELY BE THE ONE WHO WILL BENEFIT FROM SAVING A MORTGAGE DOWN PAYMENT SO YOU CAN BUY YOUR OWN HOME.
Other Options
There are other ways to get your money together that may allow you to buy a house sooner.In general, you will need to be able to account for and explain how you got the money. This is to remove the possibility that you obtained the money fraudulently or illegally! Gifting - you may have a family member or someone else you know who is willing to gift you the deposit money to buy a house.A Guarantor - perhaps your parents have a property they no longer owe any money on, or their mortgage is small compared to the value of the property. In some situations they may be able to act as Guarantor for your property loan using the equity they hold in their property.Sell some of your other assets. Perhaps you have a car you could sell to free up some cash. Or a boat, caravan etc etc... When you need cash it is always a good time to reassess what you already own that has value - and consider selling it to free up some money.Winning money - you may be able to use money you have won as a mortgage down payment. Again, you will need to be able to account for where it has come from, and each bank will consider this kind of money against their own terms and conditions. If you have been fortunate enough to win a significant amount of money, using it as a mortgage down payment would be a wonderful way to make your winnings work for you into the future.
Some Helpful Resources
Simple Savings
Here is a fantastic website with thousands of money saving ideas.It is well worth a look as it has ideas for all parts of life to help you save money.
YOUR MORTGAGE AND HOW TO PAY IT OFF IN FIVE YEARS
This is a fantastic book that is as relevant when saving for a house deposit as it is when you have secured your mortgage.
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