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First Home Buyers: save your deposit or payoff your debts first?

A question that’s coming up a lot lately – if you are a first home buyer and you have a personal loan (or another debt) should you pay that off first or save for a deposit first? Lets look at this:


Conventional wisdom says avoid paying interest and get rid of that loan first – and this is very valid, but in a rising market you may find the interest you save is less than the properties are going up in value. In this case you want to buy as soon as you can to set your price.


If you can afford the repayments on the personal debt as well as your new home loan and deposit is more of an issue – then concentrate on getting together your deposit. Now, that’s both if you feel you can afford the repayments and if you fit into a lender’s mould with the repayments in place.

If affordability is the issue then definitely you have to pay off the loan as soon as you can – look at some of our tips on budgeting and see what you can do for a short term towards reaching your longer term goals.

Don’t forget there could be other options for you to avoid having to save for a deposit, for example if you have a lump sum payment coming to you & a great rental history, or you have fantastic parents to help out.


Absolutely you look better to a lender without any other liabilities (or with fewer) but my advice is to get your broker to look at your overall position, especially when the property market is rising.

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