Buying a first home is more often than not, one of the largest financial decisions most Australian’s will make. Needless to say, saving a deposit for such an investment should certainly be of high priority for first homebuyers looking to enter the property market in the near future.
Saving a home loan deposit often poses a significant challenge for potential buyers when juggling it with the cost of living while still trying to maintain an enjoyable lifestyle. But it is important to remember that the more money that you have to contribute towards the 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.
It is important to keep in mind that most lenders require a certain percentage of your deposit to be made up of genuine savings accumulated over a period of time.
There are many different ways that you could 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:
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!
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.
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.
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.
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 you 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.
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.