With house prices on the rise, it can be hard to save the money needed for a deposit.
Recent research conducted by RP Data found property prices climbed 4.2 per cent across Australia’s capital cities over the three months of winter – marking the strongest capital gain over the winter months since 2007.
Needless to say, saving a home loan deposit can pose a significant challenge for potential buyers when juggling it with the cost of living and trying to maintain an enjoyable lifestyle.
Of course, it is important to remember that the more money you have to contribute towards your property deposit, the less money you will have to borrow and repay with interest.
While a minimum deposit of at least 5% of genuine savings is generally required, if your deposit amounts to 20% of the property’s value you may be able to avoid paying costly Lenders Mortgage Insurance. So before you buy, buckle down and work out a detailed budget to help you remove any unnecessary spending.
There are many different ways that you can boost your savings, and reach that dream of purchasing your own home sooner. Here are a few simple savings tips that you could consider when saving your home loan deposit:
1. Be realistic about your goals: In order to make your savings plan work, it is important to allow for treats every now and again and to reward yourself when you hit key milestones. This will help keep your savings momentum going!
2. Save a percentage of each pay check: Try saving 10% of each pay. It might mean that you will have to stop buying your lunch each day, but it will be well worth it in the long run.
3. Eliminate a few little luxuries: Try cutting back on eating out in restaurants, or putting your subscription TV on hold temporarily. The savings you could make on these small luxuries over even just one year can be much more than you think.
4. Find a high interest savings account or term deposit: By investing your money into a high interest savings account you could be regularly earning interest on your savings. These accounts often cannot be accessed via ATM or EFTPOS, which should also help to reduce any impulse spending.
5. Pay off your debt: Free up some of your cash by paying down any outstanding debts that you already have. This way you will have more money to put towards your savings, and eventually towards your loan repayments. Plus, it will put you in a better financial position when you apply for a home loan. Keep in mind lenders will assess your ability to borrow funds based on your assets, liabilities, income and expenses.
6. Rent a room: If you are currently renting, why not consider asking a friend to move into your spare room to help you pay the rent? This means you will be able to save half of your weekly expenses (or more if you’re clever). You may even consider moving back home with mum and dad to save in the final few months.
By taking these few simple steps in an effort to save money for your home deposit you could be on your way to home ownership sooner than expected.
For further information, and to put yourself in the best position with valuable information and guidance, contact a trusted consultant from Mortgage Choice on 07 3286 7711.