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Placing a deposit towards your property can decrease the amount you need to take out on a loan. But can you use your credit card to for a deposit towards your house? What are the risks involved with it? Here is what you need to know.
Can you use your card?
The short end of this is that you can use your credit card to pay for a deposit on a house. As much as this may seem like a convenient way that doesn’t need you to save up for a deposit it comes with many drawbacks that need to be carefully considered. Some of these pitfalls are the interest rate that is charged to the amount you take out could be double the amount that is charged on a home loan which can make it hard for you to meet repayments which can easily lead into a debt spiral.
Keep in mind that you will still need to create a savings buffer to deal with other expenses of owning a house.
How can you save towards a house deposit?
It is advisable that if you are able to put money aside for a house deposit that you do so. The general rule of thumb is to put away a deposit of up to 20% which can work in your favour by showing lenders that you are not a risky borrower. Having adequate savings in place can also decrease the amount that you need to borrow and increase the loan amount in which you can be approved for. It can also help you avoid being slapped with Lenders Mortgage Insurance (LMI).
Know what finance options are open to you
With so many financial commitments that you have to juggle it can make it hard to scrap up a deposit to place towards a house. Therefore, it helps to know what your financial options are. Speaking to a financial advisor or a broker is one of the ways in which you can know what options are available to you. Putting down a deposit towards your property can decrease the amount you need to take out on a loan.
A few of these options that can ease the strain of saving towards a property are things such as the First Home Owners Grant (FHOG) that range from $7,000 to $26,000 in state grants. This differs from state to state and will depend on the value of your property.
You can ask someone to be a guarantor who is willing to take responsibility for paying off a loan should you be unable to meet repayment. It is vital to carefully consider the implications of using a guarantor as this could impact their credit score along with yours should they fail to meet the loan repayments. Remember to always check if you will be able to afford the home loan throughout the loan term. You may have to consider choosing a property that comes with a lower price tag in order to comfortably afford your mortgage repayments.
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