At any stage of your life, you might think of how to save for a house deposit, buy a new property and find a home to settle down in. Buying a property is a large investment, which requires you to get a loan. However, to get a loan from the financial market, you need a deposit. The value of the house you are willing to buy determines the house deposit loan amount.
Many lenders ask for around 5 percent of the deposit. Remember that if the deposit amount is less than 20 percent of the house loan, you need to pay a high-interest rate or Lenders Mortgage Insurance (LMI). Our team of expert debt negotiators has put this article together to help you understand the ins and outs of saving for a house deposit.
You can save for your deposit in many ways. Sure, you need to struggle a bit at the start, but once you have ownership of the house, you can feel relaxed and happy about your achievement. For many Australians, owning a home is the ultimate dream. If you have a similar dream, here are some tips to help you save your house deposit:
9 Best Tips to Save for a House Deposit
1. Stop Partying
According to many researchers, young generations from the age of 26 to 30 spend a lot of their money partying. Every week, youngsters visit their friends and spend a lot of their money on take out and alcohol. This lifestyle might sound amazing in the moment, and having fun on the weekends might keep you motivated throughout the week, but if you compromise on going to parties and events for a year, you can save a lot of your money, which you can later funnel towards a home deposit. Imagine: if you spend $100 a week on partying, that’s $5200 in a year which you could save for house deposit! Even a $20 a week gym membership is cheaper (and better for you)!
2. Analyze your Spending
You need to make a list of your expenses and analyze your spending patterns. Often, we do not realize our expenses and where we spend most of our income. It is important to have control over where you spend your limited funds. When you control your expenses, you simply need to identify sources where you are wasting your money and then invest in options that will benefit you, such as a home deposit. Take an hour of your time, sit down with a coffee and some nice music, open up a spreadsheet and your bank statement, and get cracking!
3. Cancel any Plans for Holidays
Put a hold on all additional expenses, such as traveling during holidays to save for house deposit. When you focus on paying your home loan deposit, dedicate most of your time and money to that opportunity. You will not get such opportunities again and again – the sooner you stop paying rent, the sooner you can start paying your own mortgage – and not to mention, you never know when an economic downturn is going to impact your finances or travel plans (did somebody say COVID-19). Also consider that, if you are a couple, your expense for a trip will double. Imagine how much you could end up saving to spend on a deposit if you went camping or did a holiday at home instead!
4. Sell Items that you don’t want
We all have various items at our home that we no longer need, but most of us keep them in storage. For instance, if you used to play the guitar or any other musical instrument as a teenager, you might have the instrument but no longer play it. If that’s the case, why not allow someone else to play it? Not to mention, what’s the point of keeping an item that you do not use? In this case, you can sell the item and invest that amount for your home deposit.
5. Automate the Savings
You can increase your savings by automatically depositing a set amount into a dedicated savings account. Make sure that regardless of bank you choose to deposit with, the account offers an adequate interest rate. You need to study your options before opening an account so that you can gain maximum profit from a good interest rate and compounding interest for the time that you are saving for a house deposit. You should deposit your weekly or monthly savings directly to your saving accounts and dedicate that account to your home’s deposit.
6. Rent a Smaller Home
Renting out a smaller home is a great strategy when you are saving to pay the deposit on your home. Moving to a smaller place is a better idea since it means you save more money in rent over a shorter period. You can get a home on rent in cheaper areas. If it’s possible, you can also live with your parents at their home for a while. This helps you save the entire cost of rent, so you meet your home loan deposit goals faster.
7. Make a Budget
Setting your budget should be the first step in your planning tasks to save for house deposit. You should know how much you spend and find ways to cut down on expenses. You might be paying for various services without any benefits—even changing small items such as the number of coffees you buy can make a difference to your bottom line. If you often go out for dinner, stay at home, and cook for yourself. Understand that you only need to make this sacrifice until you save up enough to pay the deposit. Sure, once you pay the deposit of your home, you can occasionally treat yourself. However, keeping track of your expenses is a good habit to follow even after you buy your house. This helps you keep up a habit of spending only as much as you need.
8. Work Part-time
Another way to meet your financial needs and pay a deposit, is to increase your sources of income. You can perform various other jobs besides your normal job. For instance, consider signing up for surveys, freelance content writing, photography, and other activities that are part of your skill set. These activities help you make extra income. You can dedicate your second income towards a home deposit. Go online on sites like seek.com.au and search for jobs; depending on your expertise or location, you can find a suitable part-time job to help boost your house deposit. It might be hard at first, but if you look at the bigger picture, working a second job will help you accelerate your dream, and you might even find that it can help you manage your money and expenses better. You could also invest in various projects that you think will make good returns – just make sure you aren’t taking too much risk, otherwise you might lose your deposit!
9. Sell your Car
A house is a bigger investment than a car. You can buy a car later on, but you need a lot of effort and time to pay for your house. After all, keeping a car has its own costs, like loan repayments, insurance and fuel, and unlike a house, a car is an asset that depreciates over time – whereas property has the potential to appreciate in value. By saving on the expense of running your vehicle, you can arrange an adequate percentage of your home deposit quickly. If your workplace is nearby, you can then rely on public transportation or walk until you pay off your deposit. After that, you can buy a car again. In the meantime, your focus should be on arranging money for your home deposit as fast as you can.
You can rely on various other methods to save money for your home deposit. You just need to think out of the box and analyze your money trail. Cut off your expenses and sell items that no longer serve you. Once you pay the deposit for your home and have ownership of a home, you can relax, party with your friends, or buy a car. If you are interested in learning more about ways to finance your first home purchase, check out our article: Considerations on Saving for a Property (Pre-Purchase and Financing).
If you are currently in debt and struggling to get out, give our expert team of debt negotiators a call on 1300 003 328 to see how they can help you look forward to owning property in the future.