Time to spring clean your finances

Whether you’re a first-time buyer or looking to purchase an additional property as an investment, it’s wise to give your finances a spring clean to ensure that you’re in the best position possible to secure the deal you want.

“When it comes to applying for a home loan, it’s a good idea to get organised well before you’re ready to buy a property,” said ANZ’s head of home loans John Campbell.

“As part of the home loan application process the lender will want to know what you earn, details of your large and regular expenses and other debts you already have [like credit card balances or personal loans] so we can work out how much you borrow while still meeting all your other spending commitments comfortably.”

First off, reach out for guidance. Mortgage Choice broker Paul Robinson said speaking with a broker is a great starting point.

They can look over your finances and suggest any changes that could be made to better your financial situation and your borrowing power.

“While there are some great tools online, talking to someone who is going to be unbiased can give you a cross-section of lenders to fit your scenario and to know your borrowing capacity,” he said.

Then, make a budget – and stick to it as it not only sets you on the path to saving for a deposit, but it’s also an opportunity to show the lender that you are committed to a savings schedule.

“An effective savings plans start with setting a realistic budget,” said Mr Campbell.

“Popular theory has it that the best budgets follow the 50/30/20 rule where 50 percent goes to your needs, such as the costs of your day-to-day living, 30 percent to your wants such as things you enjoy, and 20 percent to your goals, which could be financial, holiday or otherwise.”

Don’t forget to check your expenses like revisiting any insurance policies that you pay, such as health or car insurance, and shop around for a better deal.

Look at regular monthly outgoings – streaming services, gym memberships – and weigh up which you can live without.

If you use buy-now-pay-later services such as Afterpay or Humm, cut the cord.

“It’s good to have a look at your credit file regularly because what that does is that it shows that no one is taking advantage of your good name and score,” Mr Robinson said.

Then allow yourself time as lenders are not just going to look at your saving deposits for the past month, so give yourself time to save consistently to give yourself the best shot.

“In regards to genuine savings, those are typically looked at by the balance that you had close to three months ago,” Mr Robinson said.

“If you had $30,000 in your account three months ago but today you have $50,000, they will be looking more at the $30,000 as genuine rather than the $50,000 because that could have come from a gift from nan, or mum and dad being helpful.”

Finally, be prepared for the future and plan ahead and make sure that if your personal circumstances change or unforeseen events happen, you can still meet your financial commitments.

Mr Campbell suggested using a free online calculator to find out how much you can comfortably borrow and calculate what your regular repayments could be.

“Remember, there are other costs to consider in addition to the deposit and mortgage repayments, these include things like stamp duty, home and contents insurance, legal fees and moving costs,” he said.

– WITH REALESTATEVIEW.COM.AU