The good news is that first time buyers are on the increase, up from 31.2% to 33.1%. The bad news is that saving for a house deposit can be a bit difficult if you are working hard and spending most of your income on monthly rental payments and groceries. Not surprisingly, the level of commitment involved puts many people off the idea, mainly because they don’t like the idea of living on baked beans for a year or two.
Luckily, you don’t have to cut your outgoings to the bone in order to save up for a deposit on your first home. With a few simple tweaks, you should have enough to use as a down payment in no time at all.
1. Do the Calculations
The bigger the down payment you make on a mortgage, the better, but you need to be realistic. If saving up a 25% deposit is going to take forever and a day, speak to a mortgage advisor and find out the minimum you need. It might be less than you think.
2. Set Up a Savings Account
It’s easy to fritter money away when it’s sitting in your current account. Instead, set up a standing order to remove a set amount every month, preferably on pay day so you don’t miss it. Filter this cash into a savings account so you can’t touch it. If you are saving with your partner, make it a joint bank account, so you can both contribute.
3. Create a Monthly Budget
Sit down with your bank statements and create a budget. There are bound to be unnecessary expenses you make that you can easily afford to cut out. Are you paying a gym membership you never use? Do you buy a takeout coffee every day? Workout at home and make your own espresso to go! Even a few extra dollars saved each month can make a difference.
4. Sell Unwanted Items
Have a clear out and make some extra cash shifting your unwanted items on eBay or Gumtree. One person’s junk is another person’s treasure. That old Nintendo Wii you never play with or the kitchen gadgets you bought on a whim and never used could boost your deposit savings account nicely. Clearing out unwanted items now will save you time and energy when you come to move, so look at it as a positive experience rather than a chore.
5. Take a Second Job
Ok, so working seven days a week is not much fun, but it will pay off in the long term. Look for a second job, perhaps in a bar or waiting tables. Alternatively, if you have a marketable skill, pick up some freelance gigs on the side. If you’re lucky, you might even be able to work at the office when the boss isn’t around.
6. Move to a Cheaper Rental
Is your rental apartment costing you an arm and a leg? It’s difficult to save when your rent is 50% of your disposable income, so look at moving to a cheaper place. Hopefully, this move will only be temporary, so look at it as a positive step in the right direction.
7. Be Realistic about Your Dream Home
The more expensive the property you aspire to owning, the bigger the deposit you will need. It’s pointless saving up for a property you can’t realistically afford to own. Instead, be sensible and look for something cheaper in a less affluent part of town. You don’t have to stay there forever, and the sooner you move in, the sooner you can start building equity towards a bigger and better property.
8. Ask Family for Assistance
Can a family member help you out with some money towards your deposit? It’s not always easy asking for financial assistance, but if a loved one could loan or gift you the money, it would lower the amount you need to save up. Tread carefully, though, and if any money is forthcoming, remember that you may need to make a statutory declaration if the money is used towards a mortgage deposit.
9. Make it a Joint Investment
Buying a property alone is a big financial commitment. However, the burden is 50% reduced if you share the load. I’m not suggesting you hook up with a random stranger to buy a home, but if a family member or good friend agrees to share the investment, you only need half a deposit. However, make sure you have some kind of exit strategy in case things go horribly wrong.
10. Downsize your Car
Car payments are often a significant outgoing. It is great driving around in a new car, but the payments will inhibit your ability to save towards a house deposit. Do you really need that flash car? I bet the answer is “no”, so why not downgrade your car for a cheaper model that costs you less and is more economical to run.
11. Sub-Let on Airbnb
It’s possible to make a decent income from sub-letting a spare room or the entire property. Obviously, this will depend on the terms of your lease, but if your landlord is agreeable, rent out your property when you’re not there. It’s a winner if you happen to live somewhere gorgeous like Byron Bay. Alternatively, rent out a driveway or garage, but again, check your lease first.
12. Do Staycations
How much do you spend on vacations each year? This is money that could be better spent on saving for a home deposit. Instead of splashing out on flights to Thailand or a hotel break on the Sunshine Coast, enjoy a staycation instead. Use the time to chill out and explore your neighbourhood. Your savings account will thank you.
13. Consider a Cheaper Neighbourhood
Some neighbourhoods are more expensive than others, which has a knock-on effect on property prices. It’s pointless trying to save up to buy a home in an expensive neighbourhood if the deposit you need is astronomical. Look at cheaper neighbourhoods. You never know, your dream home could be somewhere you haven’t previously considered before.
It’s cheaper to buy land and self-build than it is to buy an existing home. Look for a piece of land in a great location and buy it with a view to building a home within a couple of years. This gives you time to save up and learn some new skills, like plumbing and plastering. The more work you can do yourself, the cheaper the project will be. And don’t forget, self-build homes cost less and generate more equity. It’s a win-win situation.
15. Look for a Better Paid Job
Are your skills undervalued? Try asking your boss for a raise. Tell him or her you are trying to save for a house deposit. You never know, they might be sympathetic. If your pleas fall in deaf ears, start looking for a job that pays more. Any extra income you earn will help to boost your savings pot.
It takes time to save up a decent deposit towards a first home. You will probably feel despondent at the thought of waiting months or even years to gain a foothold on the property ladder, but try to remain positive and use every opportunity at your disposal to save a few extra dollars. After all, every little helps!
You should also check to see if you are eligible for a First Home Owner Grant.
The Queensland First Home Owners’ Grant has been boosted to $20,000, but only until 30 June 2017.
The Queensland First Home Owners’ Grant is a state government initiative to help first home owners to get their new first home sooner. Depending on the date of your contract, you’ll get $15,000 or $20,000 towards buying or building your new house, unit or townhouse (valued at less than $750,000). You can even buy off the plan or choose to build yourself. It’s a great opportunity to buy or build a new home in our great state.