Saving money for a home deposit can take some lifestyle adjustment, but it’s much easier when you have the right tools
Saving money for a home loan deposit can be challenging. If you’re a first home buyer, understanding the basics of budgeting can make achieving your savings goals easier. Budgeting starts with changing your mindset, making sacrifices, sticking to goals and working hard towards progress.
It takes real determination to save up for a deposit, but that only makes it sweeter when you’ve achieved your goal.
Saving for a home loan deposit can be a lot easier if you set yourself up for success from the beginning. Before you even begin to budget, there are a few things to work out.
Before you start saving up, you’ll need to be clear on what you’re saving for. It doesn’t have to be a concrete plan or an exact property listing — but you could visualise what you want in a property. Think about bedrooms, suburbs, yard space, and your favourite places to visit. Sometimes, savings goals are hard to stick to, but pictures are a way to help you visualise, so take some time to think about your property goals.
Once you know what you want, it will be a lot easier to work out how much it will cost you. Keep in mind that a property’s total costs are more than just it’s listed price. Consider other possible costs such as maintenance, labour costs, possible renovations, administrative costs, costs of living, council rates and even insurance.
This step may take you a while, but it’s worth devoting your time to it. There are many online tools and property market experts available to help you with understanding property prices and possible ongoing costs - so it makes sense to do your research.
If you’re a first homebuyer and you want to purchase a new or newly renovated home, you might be eligible for the First Home Owner Grants (FHOG) which entitles you to offset the amount of GST on your home purchase. There are some important eligibility criteria but it’s worth investigating if they apply to you.
Similarly, first home buyers may be eligible for exemptions or concessions on transfer duty under the First Home Buyers Assistance Scheme (FHBAS). Under this scheme, the amount of Transfer Duty (QLD, TAS and WA) or Stamp Duty (everywhere else) you have to pay could be reduced or waived depending on the property's value.
It’s important to know these grants generally don’t apply if you’re purchasing an investment property, you’ve owned your own home before, or you’re co-purchasing with someone who has.
It’s generally a good idea to save as much as you can for a deposit. Paying as much as possible up front may help reduce the amount of interest you pay over the life of the loan. The size of your deposit may also help determine your total borrowing power — that is, how much you can borrow and make repayments on.
Your savings goal might change from time to time throughout the next few steps, but having a rough guide can help. You should also consider your Loan to Value Ratio (LVR). Put simply, this is the value of the property minus the deposit. So, for example, if you put down a 5% deposit, you will have a high LVR made of the remaining 95% of the value.
You’ve probably already had a rough idea of this figure in your head, before you even started looking around for properties. But many people tend to overlook what they can quickly turn into cash, such as investments, shares, valuable assets like vehicles or real estate, and superannuation.
So, have a think about other valuables you currently own that could help contribute to your deposit and other expenses. Remember, having a larger deposit can sometimes help you negotiate for a lower interest rate and could save you over the loan term.
Take what you need for a deposit and subtract what cash you already have in your savings account - that’s how much you have left to make your house deposit. This is one way you can calculate your savings goal.
Finally, the thing people often dread — making a budget. To make life easier for you, Aussie has a budget planner ready for you to use. It can help you plan your income, your spending and how long it will really take to achieve your savings goals.
Work out where you can cut down your living costs. Your non-negotiables such as fresh food, rent, transport, insurance, and paying off your credit card probably won’t change too much. Perhaps other spending such as going to the movies, buying new clothes, and getting takeaway coffees could take a back seat.
Being able to afford a home loan, is more than just saving for a deposit. There are significant ongoing costs, interest to pay, and monthly repayments to make. For some people it makes more sense to purchase an established home, whereas others may prefer building a new home – but it all comes down to individual circumstances.
Your local Aussie Mortgage Broker can help you work out what’s right for your particular circumstances and current stage of life, as well as provide recommendations on how to improve your budgeting skills. If you feel like you don’t understand your options, Aussie can help you make sense of the mortgage mumbo-jumbo and explain how things could work for you.