Six ways to save for your first home deposit
It is a dream that most young couples and professionals are striving for – to take their first steps onto the property ladder. Saving for a home deposit can be tough and certainly one of the major financial challenges of buying your first property.
Rising house prices often means that first home buyers have to come up with tens of thousands of dollars for an initial deposit, which is fine if you’re earning a small fortune or have the Bank of Mum and Dad to stump up the cash on your behalf.
And if you’re a renter it is even harder to save for a deposit according to finder.com.au, who say that paying rent, utility bills and daily expenses can put make the goal of home ownership out of reach.
The good news is that some people do manage to achieve all this, even without the help from their parents.
However you will definitely need a strong saving strategy.
Here are six top tips on saving for a mortgage deposit so you can buy sooner, rather than later.
- Set a realistic budget
Take some time to understand your finances and be honest with your spending habits. Look at your bills, food, transport, entertainment and see if you can cut back on any of these expenses.
Saving for your first deposit requires continued effort and a long term outlook. You need to trim your spending right back to a bare minimum. That morning coffee on the way to work can save you $1,175 a year and your gym membership (that you may rarely use) can save you up to $800 a year. Multiply that by two, and you and your partner have saved $3,950 per year.
Deducting regular spending on a host of unnecessary items can really save you a lot and from here you can work out a budget.
Speak to an accountant as it can benefit you greatly in understanding just how much you can save each month towards a deposit.
- Stop renting
If you’re renting you may not have a penny to spare at the end of the week, which is leaving you very little money to save. Ask yourself whether you could live without your own space for a while.
Possibly move back in with your parents for a short time. It will certainly be cheaper than paying rent and all the bills that come with having your own space, and it will give you the opportunity to boost your savings.
If you don’t want to move out and you have a spare room, think about taking in a boarder. It can be a great way to help pay the bills and give you some extra money towards your savings pot.
- Shared ownership
If you’re finding saving for a deposit is a lot harder than you imagined and money is holding you back from buying your first property, you might want to consider shared ownership.
Shared home ownership and shared equity schemes involve buying some of the property and renting the rest. While you would not completely own 100% of the property it will get you one foot onto the property ladder. Maybe when you can afford it you may be able to purchase all or part of the Housing Authority’s share.
- Talk to a broker
After setting a budget the next step to buying a home is talking to a mortgage consultant/broker so you can get finance ready. You will need to gather as much information as you can about your income and expenses to understand what you can afford.
They will let you know about deposit requirements and how much you can borrow based on your income. They will do all the research on the market and get you the best deal and provide you with advice on which lender and mortgage is right for you.
- Good savings account
Shop around for the best savings account and make your money work for you. If you’re going to be saving for a number of years consider accounts that have a high interest rate with limited access, meaning they will reward you for not touching your savings.
Look for accounts which are designed for those saving to buy a property. They come with a lot of T&Cs but the interest rate will be higher for those serious about saving.
Also you should try and pay off any existing debt you have or consolidate your debt to ensure you are paying the lowest possible interest rate on it.
- Turn your clutter into cash
You will be surprised at just how much all your unwanted household items could be turned into cold hard cash!
Furniture, clothes, PS4 games, Xbox, cosmetics and shoes can generate hundreds of dollars, if not thousands by selling them on eBay and Gumtree.
If you’re serious about saving for a home deposit it will take a lot of patience and cutting back to grow your deposit. But at the end of all your hard work you’ll own a little piece of property to call home.
However for some buyers it can seem out of reach and confusing when you start to look for a home, but it is possible with BuyAssist providing genuine and alternative solutions to thousands of potential home buyers.
To find out more, talk to one of our experienced finance and realestate experts to see if you’re eligible for financial support to purchase a newly built approved property. Find out more at BuyAssist Australia.