Saving enough money to purchase a home might seem impossible for some. However, creating the right plan and strategy can make all the difference. Your plan should include thorough research of the market, performing a financial inventory, opening a savings account, downsizing, getting a side hustle, and more.
So if you’re planning to save money for a house deposit, then this article is for you. Because in this post, we will go through several strategies that you can implement to save enough money for your future home.
Research house prices and other related costs to establish a general idea of your total house deposit
Before you begin saving for your home deposit, check some houses within your price range and try getting an estimate of how much you have to pay first so you can determine the right amount to save later.
As first-time buyers, it can be overwhelming to decide on the right amount to save for your dream home. But with the housing market in mind, how much do you truly need?
Previously, your minimum deposit used to be 20%. However, seeing how housing prices rise rapidly nowadays, other purchasers prefer to buy properties with a lesser deposit rather than delay. To meet purchasers halfway, some lenders only demand a 5% deposit along with the lender’s mortgage insurance that protects them just in case the loan gets defaulted.
With these costs at hand, here are other upfront home-buying costs that you need to consider:
- Stamp duty. This is a property transfer tax that you need to pay only once as imposed by the government, usually due within 30 days of settlement. The amount varies by state. However, as you are a first home buyer, check whether you are qualified for a concession, an exemption, or a rebate.
- Conveyancing and legal fees. When you hire a solicitor or conveyancer to help you draft documents and conduct negotiations on your account, these fees are included in the purchase price.
- Inspections of buildings and pests. These are necessary because they ensure that the property is in excellent working order and that there are no undisclosed faults that might cause unforeseen costs that you have not budgeted for. They can also give you a legitimate opportunity to renegotiate in many circumstances.
Check this saving for a house calculator to compute this effectively.
Create a savings plan
You need to make a savings plan as a prelude to establishing specific steps for saving money.
- Identify your goal for saving money. In this case, that would be your home deposit.
- Calculate the purchase price and other related costs. Get a general idea of how much money you need so you can set a specific amount and time frame.
- Determine how much time you have to save. Your timeline plays a vital role as this will decide how much you need to save per period.
- Set monthly or weekly targets based on your chosen time frame. Divide the overall costs by the total number of months or weeks you have.
- Choose where to place your savings.
Perform financial inventory
You need to be aware of your monthly spendings and expenses to understand where you can cut back.
- To begin, figure out how much money you make per month.
- Understand what makes up your budget. Identify how much you spend on necessities and your nonessentials.
- Take your bank statements and credit card payments into consideration.
- Examine your list and find out where you can spend less or cut back.
Open a high-yield savings account
If purchasing a home is your top goal, saving for a home deposit should be your priority when you get paid from work.
- Consider making monthly deposits into a separate savings account that earns interest to keep your saved deposit money out of easy view and access.
- Transfer the funds as soon as you get paid, or arrange an automated transfer.
There are a lot of banks that you can browse through for this. To choose the best savings account for a house deposit, look for the following factors:
- Low minimum balance requirement
- High interest rates
- Low or no monthly fee
You can also open one for your mortgage savings account.
Consider a term deposit
You might also want to think about a term deposit as a way of saving for a house deposit.
A term deposit is a sort of savings account that allows you to lock your money away for a specified length of time while earning a fixed rate of interest. Putting the money aside for a while might help you save.
Downsizing is the practice of cutting costs and living within one’s means while saving. When you downsize, you only spend money on necessities and put the remainder into a savings account.
Downsizing may be as simple as the following:
- Moving into a smaller apartment
- Selling anything excess
- Buying cheaper alternatives
- Switching to lower mobile plans
- Cancelling unused or rarely used subscriptions
Get a side hustle, or any other part-time job if you can
Make some money in your spare time by picking up side hustles and part-time jobs.
- Get a part-time job, like babysitting on the weekends, or walking pets.
- Try freelance work. With freelance work, you can make money on your own schedule by allowing businesses to contract you for your services for a specific amount of time.
- Be an Uber or Lyft driver. If you have a regular 9-to-5 job, you can drive for ridesharing companies on the weekends, or even at late nights, when requests for trips and rates are the highest.
Look for an ideal mortgage rate
In searching for a great house loan, the interest rate is crucial. Since a mortgage is a long-term commitment, even a little variation in interest may quickly build up. As such:
- Examine house loan rates. Inquire from various financial institutions for loans that can be tailored to your situation.
- Take mortgage deposits, monthly repayments, and loan repayments into account when browsing your loan choices.
- Consult a mortgage broker if you need one. You can also ask them for some tips on how to save for a mortgage as well as finding the best home loans for you.
Eliminate negative and costly habits
You might be surprised with how much money you can save annually by removing any negative and costly practices, especially if they require spending cash.
Think about giving up bad habits and putting the money toward your home deposit instead. Some examples of these include regularly ordering takeouts and impulsive buying. Instead, try cooking your own meals and unsubscribing from marketing emails involving promos and bargains.
Make significant changes that can help you save money
There are some things that you can choose to do differently to help you save money.
- Instead of driving your car, opt for public transport. This can help you save money on expensive fees like gas, maintenance, and parking fees.
- Plan your weekly meals and take a hard look at what you already have in your cupboard before going to the market to save money on groceries and avoid wastage.
- Bring packed lunch to work.
- Skip the coffee shop. Make and enjoy your cup of coffee at home.
- Look for cashback apps and coupons.
Extra tip: Get as much help as you can with your first house purchase
As first time home buyers, the government can help you accomplish your deposit saving target sooner via:
- First Home Owner Grant
- Stamp duty exemptions
- First House Super Saver Scheme (FHSSS)
- First Home Loan Deposit Scheme
Questions & Answers
Here are some facts that you might want to check when saving money for a house deposit:
What account is best for saving for a house?
The best account for saving for a house is a term deposit, where you can lock your money away and keep it out of your sight while enjoying great interest rates.
How much of my savings should I use for a house deposit?
Ideally, you can use 15%-30% of your savings on a house deposit.
Where can I put my money to earn the most interest?
You can put your money on a term deposit to earn the most interest.
How can I save a house deposit fast?
You can save for a house deposit fast by getting a side hustle to increase your income.
How much deposit do I need to buy a house in 2022?
To buy a house in 2022, it is ideal to have a deposit of at least 20% of the property’s purchase price.
Can I buy a house with a $20,000 deposit?
Yes, you can buy a $100,000 house with a $20,000 deposit.
How can I save for a house in 5 years?
You can save for a house in 5 years by being consistent in your saving activities, particularly in budgeting, transferring funds to your savings account, and eliminating your negative spending habits.
How much to save before buying a house?
This depends on so many factors, such as your earnings, savings, and the purchasing price of the property you want to buy. The best way to know is by creating a savings plan.
Saving for a house deposit requires ample time and discipline. It may require 20% of the property’s purchase price, but this dream can efficiently be achieved with thorough research, personal financial inventory, and appropriate habits.
Start saving for your dream home today.
If you are an employee and want to access your pay ahead of time, PressPay is a great option with a fixed 5% fee and an easy sing up process.