The Ultimate Guide to Organizing Your Finances Before Buying a Home

Buying a home is one of the biggest financial commitments you'll ever make, and being financially prepared can make the process smoother and less stressful. Beyond just saving for a deposit, lenders assess your overall financial health before approving a home loan. Here’s a step-by-step guide to getting your finances in order before making the big move.

1. Assess Your Current Financial Situation

Before you start browsing properties, take a good look at your current financial standing. Knowing exactly how much you can afford will save you from falling in love with a home that’s out of your budget.

Ask yourself:

• How much can I realistically save for a deposit?
• What’s my timeframe for buying a home?
• How much can I comfortably afford in monthly mortgage repayments?

To determine this, factor in:
✔ Your household income
✔ Weekly expenses
✔ Non-negotiable lifestyle costs
✔ Future expenses (e.g., school fees, travel plans)
✔ Monthly debt repayments
✔ Savings available for upfront costs (stamp duty, legal fees, etc.)

Understanding these numbers will help you set a clear and achievable home-buying budget.

2. Understand Your Borrowing Capacity

Once you have a clear budget in mind, the next step is determining how much you can borrow. Lenders evaluate your borrowing power based on:
✅ Your income
✅ Existing financial commitments
✅ Living expenses
✅ Savings history
✅ Credit score
✅ Property value
✅ Loan term

Since a home loan is a long-term commitment (often up to 30 years), consider future changes such as career shifts, family expansion, or moving overseas. A borrowing limit calculator can provide an estimate of how much you may be eligible for, but consulting a mortgage broker can give you a more tailored understanding.

3. Prepare for Additional Buying Costs

Many first-home buyers focus solely on the deposit, but there are other upfront costs to consider, including:

💰 Stamp Duty – A government tax on property purchases that varies by state and property type.
💰 Mortgage Registration Fees – Charged by state governments to register your mortgage.
💰 Transfer Fees – The cost of transferring ownership from the seller to you.
💰 Conveyancing & Legal Fees – A solicitor or conveyancer helps manage the legal process of transferring ownership.
💰 Building & Pest Inspections – Essential for ensuring the property is structurally sound.
💰 Buyer's Agent Fees (if applicable) – If you engage a buyer’s agent, their fee should be factored into your costs.

Being aware of these additional expenses helps prevent any financial surprises down the track.

4. Fine-Tune Your Home Loan Repayment Plan

Understanding your potential home loan repayments is key to long-term financial security. Before locking in a loan, consider:
📌 How much money do you want left over after your mortgage for savings, travel, and lifestyle expenses?
📌 Are you prepared for possible interest rate increases?
📌 Would you prefer a loan with features like extra repayment options or offset accounts?

Using a Home Loan Repayment Calculator can give you an estimate of your repayment commitments, helping you decide on a loan that aligns with your financial goals.

5. Strengthen Your Deposit and Financial Profile

Your deposit is one of the biggest hurdles to homeownership. While a 20% deposit is ideal, some lenders allow smaller deposits, though this may require Lenders Mortgage Insurance (LMI).

To boost your deposit savings and strengthen your loan application:
✔ Consolidate all your savings into one account for better tracking.
✔ Minimize unnecessary expenses to save more efficiently.
✔ Reduce existing debts, including credit cards and personal loans.
✔ Avoid applying for new credit before seeking pre-approval.
✔ Keep your financial records organized – lenders often require bank statements from the last three months.

Having a strong savings history and low debt levels makes you a more attractive borrower, increasing your chances of securing a competitive home loan.

Final Thoughts

Buying a home isn’t just about saving a deposit—it’s about ensuring your overall financial health is in check. By understanding your expenses, borrowing capacity, and additional costs, you’ll be better prepared for the journey ahead. Whether you’re a first-time buyer or a seasoned investor, taking these steps will set you up for a smooth home-buying experience.

This article was adapted from insights shared on domain.com.au and Suncorp Bank.