1. Broader understanding of the costs involved in buying a property
There are a lot of upfront costs to be aware of when buying a property that can add thousands of dollars to the process. Saving for a deposit is only one step in buying a home. There are other costs like settlement fees, shire and water rates. Purchasing a home will change their spending habits for the long term.
Highlighting to your child that they need savings beyond their deposit will prepare them for the extra costs that come along with buying a home. There'll be ongoing monthly bills and possibly an emergency fund for when appliance or maintenance issues arise. Perhaps you can share your techniques for managing bills and household expenses. Read our costs to prepare for home ownership for some guidance on what to expect.
This might be a good time to mention budgeting. Encourage your child to sit down and create a budget, taking into account what they currently spend and what would be affordable for them. You can read more about budgeting.
2. Research is key
A home loan is a pretty big deal - while a first home may not be a forever home, it's likely to be the biggest purchase your child will ever make. Encourage them to look around to see what will work best for them. Things to consider are type of housing, interest rates with different lenders, what locations are in their price range, distance to work, infrastructure in the area, and nearby facilities. What are their plans? Do they intend to stay in this home for years or are their plans likely to change?
It's easy to get caught up in the excitement of househunting but being realistic will make the process somewhat smoother. Sitting down and putting a list together of what are the must-haves and what are the nice-to-haves will give them a framework to refer
to when viewing homes or home opens.
3. Stick to a price range
Getting conditional approval before starting househunting ensures your child will know their limit and what they can reasonably afford. This is crucial to avoid putting themselves under financial pressure.
4. Know the incentives
In Western Australia, we're fortunate to have some government incentives for eligible first-home buyers. We have a guide that highlights the various benefits offered to first home buyers. The Housing Authority's website is another great place to keep up to date with government incentives for first home buyers.
5. Mindful spending - they'll be assessed on it
When they are in the saving phase, your child should consider how much they can save by cutting out unnecessary spending.
When applying for a loan, your child will be assessed on their ability to pay back the loan. There are several ways they can be assessed on this, including a thorough review of their bank statements to determine their living expenses. It's a timely reminder to look at how much they spend on things like Uber Eats and new clothes. Did you know that lenders consider Afterpay a debt when assessing a loan?
A good place to start is our How much can I borrow tool. This will give your child an estimation of their borrowing power and what their monthly repayments could look like. Then they can analyse their spending to determine what costs they should cut back on to comfortably manage a home loan.
6. Never feel pressured
It's important to remind them that they should never feel pressured to commit to anything until they're sure. By following the above steps, they should be in a pretty good position to know their options before making a decision.
Tips for saving your home deposit
How much can I borrow?
Do you qualify for a home loan?