Saving up first is best option
THERE is nothing more stressful for many young people than the pressure of saving for their first home - that is until they start to pay the mortgage.
Financial planner John Shephard of RBS Morgans said there were several things young people could do to maximise savings.
"The number one thing is budgets," he said. "Work out what your expenses are and look at what you can eliminate."
"Really you need to be able to get about a 20% deposit because then you don't have to pay mortgage insurance."
Mr Shephard said rent was a big item on any budget and young people should consider staying at home while saving.
"I come from Brisbane ... it was definitely easier (in Brisbane) because rents are higher in Mackay, so that makes it difficult to save," he said.
"What people tend to do is get together and share and that cuts your costs down."
Mr Shephard said the government's first home saver accounts were also a great way to save, but young people had to be certain they actually wanted a house.
"You need to put $1000 minimum every year over a four year period and it's only taxed at 15% and the government will actually give you up to 17% (contribution) on the first $6000 that you save," he said.
"They're not a bad deal; the only thing is you're locked into that because you can only use that for your first home loan and if you change your mind it goes into your superannuation and it's locked up until retirement."
Mr Shephard also warned against being hasty and falling into the trap of taking on a developer's "no deposit" house and land package scheme.
"Anything that sounds too good to be true usually is," he said.
While buying a home gives you somewhere to live, it could also open up other doors, Mr Shephard said.
"Once you've got enough equity in your home you can actually use the equity in the home to perhaps buy another home or make an investment, buy some shares."
Mr Shephard said while superannuation was important, young people should look at saving for a house deposit before contributing to their super.
"Superannuation is a good investment. The only thing is it's there until your retirement and presently that's 67."
"You can't get the money out to buy a house. Superannuation can come later on."
Top Tips from John Shephard
- Draw up a budget and stick to it
- Save 10% of everything that you earn
- Avoid credit cards and paying unnecessary interest
- Don't get sucked into a scheme that sounds too good to be true
- Open a government first home saver account
- Have a substantial deposit of at least 20%
- Compare a few different loans before deciding on one
- Work out what you can afford to spend on your mortgage repayments
- With interest rates at a record low, those who already own their own home should be taking advantage of the low rate by making extra payments
- Before you buy go to as many auctions and read up on property prices