Saving for your first home deposit is a huge milestone on the way to buying your first home and can help relieve the stress of increased mortgage repayments down the line. Saving a lump sum of tens of thousands of dollars is no easy feat however, and takes time, commitment and patience. The most important thing is to get started and find the right tools and tips that will help you with your saving journey.
Which is why we wanted to share our Top 5 Tips to Save your Deposit Fast. We’ve done the all the research for you to put you on the path to your first home, so read on and jump to it!
1. How do I start?
Creating a budget will help you to find out exactly where you are sitting financially and how close you are to your goal.
Your budget will not only show your current financial status, but it should also be showing you where you are spending the most money plus highlight any “luxury” areas that you can cut back on such as entertainment and eating out. Once you know your non-negotiable outgoings, like rent, bills, petrol, food and insurances, and your incoming wage, you should be able to clearly determine how much you can realistically save each week and how long it will take to achieve your goal amount.
There are lots of budget tools available to help you with creating a budget including: www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/budget-planner which we found the easiest to use.
Quick Tips: Once you figure out your budget for your home try and save your expected weekly mortgage repayments every week so that it isn’t a shock when you make that transition.
2. What tools for tracking and reaching my goals are out there?
Staying accountable and on track can be hard. However, keeping track over time even through unexpected setbacks is important. We get that life is super busy, and the last thing you want to be doing on a Friday night is looking at finances so we’ve found some great apps and tools to help you keep that budget on track.
Most lending institutions and banks have apps available specifically for saving your deposit including Commbank and ANZ. ASICS also have a great easy-to-use expense tracking app called Track My Spend that is a great launching pad for anyone who wants to get their saving on track, or even create their very first budget. Expensify and Pocketbook are two other great options available for tracking and reporting on your daily expenses.
3. How much should I borrow for my deposit?
Sometimes it isn’t always possible to save the full amount required for your home deposit but the more you save (generally) the better. Your home loan application is much more likely to be approved if you can show that you have strong savings available. Also, it means that you won’t have to borrow as much money resulting in less interest paid to the bank over the life of your loan. Finally, if your deposit is less than 20% of the property value, there may be added costs involved in getting a home loan including Lenders Mortgage Insurance. Here is a calculator for figuring out how much to save: www.anz.com.au/personal/home-loans/calculators-tools/deposit-calculator
4. Can I save for a deposit if I’m still in debt?
Not all debts are created equal and it’s important to be aware of the affect your credit card debt or car loan may have on your home loan application. Generally, the less debt (or liabilities) a person has, the better but while you do want to bring down as much of your debt as possible, it’s still a good idea to be aiming to save as well.
Bringing down high-interest debt is the best place to start (i.e. credit cards) and consolidating your debts can be an option to create a way out of multiple payment dates and interest rates. If you are in this situation speak to a financial advisor or broker for some professional advise on the best next steps for you to take, but don’t be discouraged! Your first home is still well within your reach.
5. What other ways I can save money for my deposit aside from my main job?
There a lot of ways to easily add to your savings on top of your regular income. From amazing side hustles, online services, to casual evening and weekends jobs, there is a multitude of other avenues that can help you save your deposit outside of the normal 9 - 5.
Other great ways to save are:
- Moving back home or moving into a flatshare in an affordable area to reduce rent payments
- Using public transport instead of driving and/or owning a car
- Cooking meals at home instead of going out or ordering takeaway
- Buying second-hand items instead of new
- Shopping around for the best deals offered by banks and other lending institutions
- Seeing if your family are willing to take out a Family Guarantee. This is an official obligation that your family will pay the loan should you not be able to pay it yourself and means that you can purchase a house with a minimal deposit.
Along with these tips, it’s worth looking into the grants and concessions available from the government specifically for first home buyers. Check out one of our recent blog posts covering first home buyer grants here: https://blog.evolutionbuildinggroup.com.au/how-to-buy-your-first-home-1
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