6 ways to buy a decent home on a shoe string budget

Published on December 1st, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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‘I want to live in a box with thin walls and ridiculously high rent’, said no human ever. You might have kick-started your 2018 with a resolution to stick to your budget, but still being able to afford the home you want. Although property prices in Australia are high you can still afford a decent home on a tight budget coupled with a home loan. Here are 6 tips on how to financially prepare yourself when buying a new home.

Secure a home loan that works around your budget

There are no quick fixes. There is only researching and strategizing that will help you make your home loan work in favour of your set budget. We can all agree that a home loan is one of the major expenses in life you will ever have, but you can reduce the payments to less than 20 years if you come with a strategy. By putting a little extra into your home loan repayments can make the world of difference.

If you take out a loan amount of $500,00 at an interest rate of 4.00% p.a, your monthly repayments would be $2,639.18. With the interest rate included you could be looking at the total cost of the loan sitting at $791,755.26. By adding an additional $250 on your repayments you can pay the loan off quicker.

See where you can make possible cuts

To bump up the amount that is needed for your monthly payments you will have to address your spending habits by looking at what you spend on a monthly basis. You will be surprised how the small purchases you make add up to money you could be using elsewhere. If possible, you can look into making money through other means. Explore your talents.

Let your savings do the savings

Take advantage of the features that your saving has to offer when it comes to paying off your mortgage. Take advantage of a 100% offset account that is linked to your mortgage. It can help you in terms of reducing the amount of interest you pay on the overall payment of your home loan. The amount that you will save will be determined by how much money you leave in an offset account at any given time. It’s advisable to speak to your bank to work out a plan that will be suitable for your budget without leaving you broke.

Mix and match to suit your budget

Make the most of what is available to you. There is no need to blow your budget. When you are spoilt for choice always remember that you can mix and match to make a loan that will be suitable for your budget.

Work with what you have and by all means avoid keeping up with the Joneses because you might not know half of the crazy things they have to deal with in order to maintain their lifestyle. Keep your repayments a top priority and try to negotiate for a 0.1% reduction in the interest that is paid towards your home loan.

Never settle, you deserve better

Working towards your dream home needs some calculated steps. Before you jump on the bandwagon on the first home loan that comes your way, sounds good and looks good, compare your options. After all, you deserve better. Even if you have already taken out a home loan, you can always look for one that offers you a competitive interest rate to match your needs. If you don’t want to leave your current provider research and ask them to give you a better deal.

Visualize and keep it goal focused

It’s always good to visualize what you are working towards. Whether you have pictures of your dream home, right down to the detail of how you want every room to look like pinned to a board, keeping it in front of you will force you to make it happen. Be realistic in terms of your current financial position, and re-evaluate it regularly. Speak to a financial advisor who can help you by setting realistic goals on how much you can set aside. These are essential things that will keep you going when things get tough.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

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The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well as others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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