September 14, 2018
Saving for a deposit
Are you saving? Maybe for your first home, a car or even a holiday. It may feel like your dream is out of reach but with some careful planning and the right advice, you’ll find yourself reaching those important milestones. We’ve helped a lot of customers take control of their finances and reach there financial and homeownership goals and we have picked up a few tips and tricks along the way.
Set your goal
The first step to successful saving is setting a realistic goal. Think about how much you earn and how much you can afford to put aside after your expenses. If you spend what you earn then you may need to cut back on a few luxuries. Set up a budget to help you understand your spending habits.
Sticking to your budget
Allocate an amount from your pay each week, fortnight or monthly into your savings account (we recommend doing this right after your paycheck arrives!). Regularly allocating small amounts of money will help you build up steady savings if you deposit large lump sums or over save you may find yourself dipping back into your savings to cover other expenses. If you find it hard to set aside money your employer may even be able to allocate your pay into separate accounts if you request it. You can also set up automatic transfers between your bank accounts so the desired amount with is transferred to your savings as often as you want.
Maximise your saving & reduce spending
Get the most out of your money by using a high-Interest rate savings account to maximize your savings potential. There are also simple ways to reduce leisurely spending such as:-
- Making your own lunch
- Tap water instead of bottled water
- Visit a friend for coffee instead of going out
- Downsize your coffee
- Dine at home instead of a restaurant
- Cancel unused gym memberships
- Cancel unused pay TV subscriptions
Preparing a budget can help you identify little ways to cut costs or pick out those big saps on your cash flow. Cutting back in the short term can help you reach those bigger goals sooner.
Saving for a Home
Most Mortgage Choice lenders require 5% of your homes purchase price in your account for 3 months for a home loan deposit. This is known as genuine savings. Having genuine savings helps show the lender you have the ability to make the repayments on the home loan. The more savings you have the less you need to borrow, reducing both your loan as well as LMI (Lending Mortgage Insurance). If you save more than 20% of your homes purchase price then you do not have to pay LMI at all.
If you’re trying to save for a home loan deposit we recommend coming in and sitting down with us so we can help you crunch the numbers and identify your target goal for savings. Different lenders will take into account your rental history and any equity you may have in another home or stocks, so letting us compare all the different lending policies can save you time and possibly money too
Using Rental History
If you are renting through a Real Estate Agent some lenders may even let you use your rental history as proof of ability to make repayments. We can work with you to identify these lenders that best suit your situation so give us a call today!
Another option is getting a gift from a family member, which can be used to help with the funds to complete at settlement. Family Security Pledge is where a parent uses part of their property to add to the property you are purchasing to reduce the LMI and make it easier to borrow the funds. Different lenders will address this gift of money in different ways and you will still be required to show evidence of genuine savings in order to qualify for a loan.
Ensure you still get out do things even though you are saving as hard as possible. If you are locking yourself away to save every penny then you are less likely to stick to your budget. There are many things you can do that don’t cost very little to no any money at all. You could:
Sign up for a free class.
Visit a local beach or gardens
Have a picnic
Swap clothing with friends
Plant some flowers in your garden or try growing a veggie patch
Host a dinner party and everyone can BYO one dish to share.
Start a DIY project.
To take control of your finances today and get expert advice on reaching your savings goals, give the team at Mortgage Choice Ballarat a call today on 03 5331 3632