Buying your first home is an incredibly exciting and oftentimes life changing experience. You get to choose what suburb you want to live in, the design of your home and all of the interior features. What’s not as enjoyable as these things is what comes before, the saving for a deposit part. Saving for a despot is a crucial step in the home ownership process however, and the more you save, the less you have to borrow from a bank or specialised lender.
There are many ways to start saving for your first home deposit which don’t have to change your lifestyle significantly. Here we outline 5 tips that will get you on your way to saving for a home deposit.
1. What can you afford
First things first, you need to find out what you can actually afford. The preliminary step in saving for your first home deposit is to work out what you can actually afford and then decide what sort of properties fall into the price category applicable to you. Based on your income and expenses, there are a variety of mortgage calculators out there that can help you to figure out the budget for your first home.
2. Manage your debts
There is no doubt that credit cards are incredibly convenient when you are that little bit short on cash. While it is a quick and easy process to apply for a credit card, it’s not so easy to control and manage debt when you go that step too far with spending. Consolidating your various credit cards as well as paying off debt can help you save as you will not be paying interest charges.
Think about all of the more material things that you own that you wouldn’t have even bought if you didn’t have a credit card? All of these items add up and your first home deposit can be so much bigger by letting go of your credit cards.
Another important thing to mention is that when it comes to borrowing from a financial institution, lenders will take into consideration your level of debt when evaluating your ability to repay your mortgage. If you have large amounts of unpaid debt, lenders may not approve your loan at all or they will charge you higher interest rates because you are seen as a risk.
3. Cut back
We know that when it comes to saving for your first home deposit, cutting back on the little luxuries in life is easier said than done, however trimming down on certain luxuries is the key to making your deposit possible. A good way to start cutting back on your current spending is to set a budget. Calculate what your essential expenses are (such as food, bills, transport) and subtract this amount from your income. This amount you can be putting towards your first home deposit. Cutting back on the little luxuries can be difficult all at once so here are some progressive steps that you can try out:
– Put your Netflix subscription on hold for a month, you probably still have Foxtel and Presto.
– Take your lunch to work every day for a month could save you a minimum of $10 per day!
– Stay away from retail therapy for a month, your wardrobe can probably survive without a third leather jacket.
– Go alcohol free for a month.
To help you stay on track with saving for a deposit there are numerous resources available, click here to find a popular app endorsed by the government.
4. Move home
If you have been living out of home for some time, the idea of moving back into your family home could make you feel a little green around the gills, but reducing the amount of rent that you pay is a great way of saving for a first home deposit. Some young people today spend up to two thirds of their income on rent alone, not taking into account other expenses or money spent on going out and enjoying life. While your parents may ask you to contribute some funds while living at home, I doubt they will ask the majority of your paycheck to be put on the table.
5. Separate your accounts
Making your money more difficult to access is a good way of starting to save for your first home deposit. Most banks will have a range of online accounts that can be established separately from your everyday account so that you can dedicate an account entirely to savings. To access money in the savings account, sometimes banks will charge a fee for making transfers or there are even accounts where you cannot access your money for a specified amount of time at all! Sometimes the easiest way to save money is to have it just out of reach.
Have you been struggling to get into a home of your own because of financial difficulties? At No Savings our goal is to open the door to home ownership for as many West Australians as we can. We specialise in helping first home buyers who have had trouble obtaining finance before with our no deposit home loan options. Contact us today and see if you qualify.