Beyond the deposit: how to prepare your budget for home ownership

When you think about buying your first home, the first thing to come to mind is probably the deposit. But what happens once you hit that magic number? Here’s how to prepare your budget for homeownership, beyond just saving a deposit.

Rehearse your mortgage repayments

Before you purchase your first home, it’s a good idea to practice making the mortgage repayments you’ll soon be paying. You can estimate how much these might be using our online mortgage calculator and the rough amount you plan to borrow.

Each month, set this amount aside into a savings account. If you’re currently renting, you can set aside the additional amount on top of your rent that you’ll be paying once you’re a mortgage holder. It’s a great way to prepare in advance for what your new cashflow situation will look like, so you’re not shocked when the time comes to move in. Plus, it demonstrates a strong pipeline of savings history to lenders.

Build up a buffer

If you’re currently renting or living with family, you may not be used to being financially responsible for things going wrong around the house. Burst pipes, heating issues, and pest problems all become your cost to wear once you’re a homeowner. That’s why a robust emergency fund is vital for managing the unexpected costs of homeownership.

If you currently have an emergency fund, consider increasing it to weather the risks of more unexpected costs. If you’re yet to start one, build that buffer before you move in to give yourself the peace of mind that you can handle unexpected costs.

Estimate your fringe costs

Not only does being a homeowner come with unexpected costs, it comes with some expected ones, too. Outside of your emergency fund, you’ll need to factor in things like council rates, owner’s corporation fees and insurances to your household budget. You can get estimates for what these could be in your local area by searching online or asking friends and family members. Just like rehearsing your mortgage repayments, getting used to factoring in those homeowner extras will set you up for success later.

Brace for repayment fluctuations

If you’re currently renting, you’re likely used to bracing for annual rent increases. As a homeowner, variable interest rates can fluctuate any time throughout the year. If your home loan is on a variable interest rate, your rate will change in line with economic shifts. This means changing repayments. Sometimes rates go down, reducing your repayments. Sometimes they go up, increasing your repayments. When you start to plan ahead for making your repayments, it can be helpful to calculate what your repayments would be at different interest rates. You may even want to plan for rates to be 0.5% - 1% higher than you’ll actually be paying. This helps to reduce budget shocks if rates do increase.

Take your budget preparation to the next level and simulate your new household budget with the Bendigo Bank Online Budget Planner. You’ll be among the savviest first home buyers around – and your finances will thank you later.

Any advice provided in this article is of a general nature only and does not take into account your personal needs, objectives and financial circumstances. You should consider whether it is appropriate for your situation. Please read the relevant product disclosure statement(s) available on our website before acquiring any product.