Money & Finance
Saving For A House Deposit – Hints and Tips to Help You Save
Saving for a house deposit: what does it really take? Forget the quips about avoiding smashed avo – we’ll show you how to get ahead and make your dream a reality. The first questions you’re likely to face are, “how much do I need?” and “how long will it take?”
The best way to find out how much is to check in with home lenders. They’ll advise you on minimum deposits, your purchasing power, and other factors like mortgage insurance. The least you can get away with is usually about the 5% mark, which is $25,000 on a $500,000 purchase. You should also start investigating the sort of location and house you’re after so you get a realistic picture of the market. In terms of how long it takes, everyone is different but some recent research puts the average time to save for a deposit at just under four years.
Once you know where you want to get to, the next question is how to get there. As the saying goes, “if you fail to plan, you are planning to fail.” Or another way to look at it: cutting back on coffee ain’t going to cut it.
There’s no getting around it: you’re going to need a plan.
A 5-step plan for your home deposit
These are big dollars you need to save and that means looking at your financial future from all angles. You’ll need to:
- Double down on debt
- Track your spending and create a budget
- Snip and save
- Earn more moula
- Create healthy habits
If you’re carrying historic debts, now is the time to consolidate them, then clear them to avoid paying extra interest. Take care of this first before you start saving.
“You can’t manage what you can’t measure”. Successful saving is made much easier when you know your budget and can see where you’re spending. The good news? There are a huge array of apps to help you do this – check out this review for Australian savers.
It’s time to take a long look at your lifestyle and work out what you’re prepared to sacrifice to get ahead. Big ticket items include renting out a room, moving back home, downsizing your car or getting rid of it all together and taking local holidays. Smaller ticket items? Eating and drinking at home rather than dining out, buying in bulk and at cheaper chains, and reducing recurring fees like gyms and media services.
It’s not all about your current paycheck. Get creative and think about how you can bring more money in to boost your savings. First things first, focus on your current career. Can you apply for a promotion, ask for a pay rise or even change jobs (if it makes sense given your situation)? Or are there other opportunities out there? Can you use your skills to take on freelancing work, or take a second job? With platforms like Uber, Upwork and Airtasker, you can easily turn your side income on and off as it suits. If you’re comfortable, you can also look into making investments if it fits your saving timeline.
The #1 tip here is to pay yourself first. Automatically transfer savings to a high interest account when your pay comes in and decrease the chance that you’ll overspend. Other handy hints: if you’ve got a credit card habit, learn to live without them, limit impulse spending and shopping-as-entertainment, and become more mindful of both your savings goal and spending decisions.
The new home advantage
One aspect of your savings journey is deciding whether to build a new home vs purchase an existing one. There are a number of advantages to building:
- Lower repairs, maintenance and running costs, particularly if you build with sustainability in mind
- The chance to create a home that suits your needs perfectly
- Financial incentives, such asl ess stamp duty and access in some states to grants for building new homes
The best way to save for a house deposit can vary, depending on spending habbits but there are various benefits to each of the tips provided above.
Increases your power to borrow: The more frequently you save towards your first house deposit, the less risk you represent to a lender. The more you save, the more you borrow.
More choice: Making consistent savings deposits enables you to access a wider range of loans, as more borrowing power grants you access to more lenders’ products.
Access special rates and deals: Consistent house savings deposits may attract high loan qualifications with low-interest rates that save you more money.
If you want to start saving for a house deposit, talk to your friendly G.J. Gardner Homes office first. They’ll give you useful advice to get you started and help you decide whether building a new home is right for you.