Ask an Adviser - Short Term Goals Saving for a House

Top answer provided by:

Andrew Pericleous

View

What a wonderful question and believe me we get asked this question a lot!

I would be very reluctant to recommend growth assets such as shares, managed funds or listed property funds for your savings. These are volatile assets and in the short term can produce negative returns. We only advise our clients to invest into growth assets when their investment time horizon is 4 to 7 years, thus allowing you the opportunity to ride out short term volatility.

I would recommend a high interest online savings account. Yes interest rates are very low at the moment, however, there are many online lenders offering term deposit rates but with the flexibility of earlier withdrawal, so if you are ready to purchase your dream home you are not lock into a time period such as a term deposit. Some also offer you bonus interest if you make regular deposits.

Here are also some other handy tips:

When it comes to saving a deposit to buy a property there are three main things to think about:

• · How much you can save― the bigger your deposit, the less you’ll need to borrow and generally the less interest you’ll pay over the life of the home loan. However, saving a large deposit may take time and in a market where prices are rising, the home you want may become more expensive. It’s a balancing act and you need to make a decision that’s right for you.
• · How much you aim to spend and how much you can borrow― most lenders will generally ask you to have 10–20% of the property price in genuine savings so you can show you have the financial discipline to repay a loan. But some financial institutions may lend to you if a family member provides the deposit, signs as guarantor or buys the property with you as a co-owner. However, you’ll still need to show you have savings and the ability to repay the loan.
• · Create a budget and monitor your expenses ― The less you spend the more you can save. Easier said than done! However, most successful savers work off a budget to identify cost savings to reach their goal. You must also monitor your expenses to make sure things do not get out of hand. Strict discipline is always required to reach your savings goals.

Also when saving for a deposit for a home further line items must be taken into consideration such as building inspection costs, stamp duty, conveyancing costs, mortgage insurance if required etc.

It is important to seek the right advice and we wish you well on the road to becoming a home owner.

Regards,

Andrew Pericleous

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

Andrew Pericleous from Centaurus Wealth Pty Ltd

Was this helpful content?Let others know - share and vote-up