It’s natural for younger people looking to enter the property market to feel overwhelmed in the face of stiff competition. But there are reasons to be cheerful. Armed with some strategic savings tools and careful planning, Millennials and Gen Z can become homeowners sooner than they thought possible.
The current state of play
Great Southern Bank’s No Place Like Home report found that younger generations believe they have more to learn about managing money. That statement alone is cause for optimism. It reflects an awareness of the gaps in their own financial literacy, and a willingness to improve it – vital attributes to achieve homeownership.
Saving for your first home
Despite the competition for properties, there’s still a path to homeownership if you stay the course.
You can speed up the process by understanding what financial resources are available to you.
Here are some to consider.
Savings tools
The good news is that Millennials have a strong savings mindset. Two in three Millennials (63%) prefer saving their money rather than spending it, according to the No Place Like Home report.
High interest savings accounts are easily accessible and help grow your savings faster than keeping your money in a standard everyday account. Look for one with no monthly account fees so your money stays yours.
A popular way to increase savings is to use ‘bucketing’. Bucketing is a budgeting method where multiple accounts are opened, each for a particular purpose eg. bills , food, holidays, home deposit etc. Regular transfers to these accounts from the account you get your salary paid into mean you’re less likely to dip into your savings when the next bill rolls around.
There are also clever tools such as The Boost which is designed to grow your savings and The Vault which locks your savings away until you’ve achieved your goal.
Calculators
Great Southern Bank’s website has calculators you can use to create a plan that works for you.
Use the budget planning calculator to understand your income, expenses, and where you cut back on spending so you can save more.
Savings calculators help you work out how much money you’ll need to save to reach your home deposit goal.
Finally, home loan calculators help you work out how much you can afford to borrow, what the repayments might be, and what costs you’re likely to incur when buying a home (think stamp duty, Lenders Mortgage Insurance etc.).
Government schemes
Right now, there’s a lot of focus on helping young people buy their first home. Federal and state governments offer schemes you could tap into, so it’s important to know what’s on offer.
First Home Guarantee - Buy a home with as little as 5% deposit and avoid paying Lenders’ Mortgage Insurance.
Family Home Guarantee for single parents and legal guardians - Buy a home with as little as 2% deposit.
Regional First Home Buyer Guarantee - Buy a home in a regional area with as little as 5% deposit and avoid paying Lenders’ Mortgage Insurance.
Your state government may also offer first homeowner grants, while government and non-government shared equity program like BuyAssist are also available in some states for eligible buyers.
Family help
The ‘Bank of Mum and Dad’ is an increasingly common option being taken up by young people wanting to buy their own homes.
Financial help from parents can come in the form of cash (a gift or loan) or as guarantor to their child’s home loan.
According to Great Southern Bank’s No Place Like Home report, Millennial first homebuyers are three times more likely to have received financial help from their parents than Baby Boomers.
This trend shows no signs of abating with the report finding almost half of Gen Z are considering asking for help from their folks.
Expert advice
In the past year, most young people hadn’t spoken with a qualified finance professional, according to the No Place Like Home report. Less than a quarter of Millennials and Gen Z have a financial plan prepared by a qualified expert.
Consider making a relatively small investment to set up a financial plan. This will help you get a clearer picture of your financial situation and goals.
Of course, Great Southern Bank’s home loan specialists are available for you to speak to at any stage of your home-buying journey. And they’re free!
Competing against Boomers in the property market can seem like you’re being thrown to the wolves. But, using the resources available to you, you can find your way into your own home sooner.
Important Information
Great Southern Bank, a business name of Credit Union Australia Ltd ABN 44 087 650 959, AFSL and Australian Credit Licence Number 238317. Conditions, fees and charges apply. This is general information and does not take into account your objectives, financial situation or needs. Consider the appropriateness of the information, including the Terms and Conditions (T&Cs) booklet, before acting on it. The Financial Claims Scheme may apply to this product; refer to the T&Cs for more information.