Many first-time buyers are convinced that they are ready to afford the home of their dreams, only to have the bank turn them down due to a low affordability. What does this mean and how can you improve your affordability?
We dig a little deeper into this concept and share some great money-saving hacks to help you improve your chances of buying your dream home.
Saving For Your Dream Home
Your affordability is determined by a relatively easy sum:
- Take your monthly income after all appropriate taxes.
- Deduct your expenses, like travel costs, rent and groceries.
- Deduct any other financial commitment, like medical aid, insurance and debt repayments.
- This leaves you with a figure that we can loosely call your affordability rate. In other words, how much you can spend on a home loan.
This is generally the first thing that a bank will look at when you apply for a home loan. Banks require an applicant to be able to comfortably pay up to 30% of their monthly salary towards their loan.
The above sum easily shows where you can work on improving your affordability – spending less. Let’s look at a few money-saving hacks to get you closer to your dream home.
- Cancel any subscription or billing item that you do not absolutely need.
- Stop eating takeout – save money eating home cooked meals.
- Buy your home groceries in bulk to save money.
- Sell items that you do not use anymore.
- Save any spare cash, you can use this for items like food and other necessities.
- Go green with your household cleaning products. Not only is this good for the environment, but it is also great for your pocket.
- Reduce, Reuse, Recycle! Being more conscious of what you buy and how you use it will inadvertently help you to save without realising.
- Join lift clubs or use public transport to save on travelling expenses.
- Temporarily rent a less expensive home.
- Get intentional about your electricity bill. You may be surprised how much you can save.
- Shop with a hand basket instead of a trolley. Carrying the weight of your shopping will encourage you to stay to a list and help you to cut down on impulse shopping.
- Learn to say no. We are often bombarded by salespeople who are constantly trying to upsell their products. Saying no can save you a lot of money over the long run.
- Grow your own food. Start a veggie garden and save on your monthly grocery bill.
These are fun and easy methods of saving money that you can even teach your kids. You will be surprised how quickly you can change your affordability status and how much you will save towards your deposit if you pay a little more attention to your spending habits. Allocate any savings into a nominated bank account to help you see your money grow.
Buy your dream home in no time! The Milkwood Townhouse Complex is a brand-new and secure estate that is ideal for young professionals and families alike. With no transfer fees, you will be this much closer to making your dream a reality. Contact one of our agents today if you would like to make a viewing appointment.