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According to stats, it takes an average of five years for home buyers to save a 20 percent deposit to purchase a median-priced home in Australia. It is, therefore, not surprising that saving up a deposit is usually the first, and often the longest, part of every home buyer’s journey.

 
How to save a home loan deposit
 


What is a deposit?

A deposit is an initial payment you are going to use to fund your house. A few years back, it was possible to get up to 100% LVR loans (loans for the full value of the property) and even more. Today, 20 percent is the golden rule when it comes to your home loan deposit. Thus, for a $600,000 house, you must have $120,000 in your kitty as a deposit. You must save a little extra to cover additional expenses such as stamp duty and conveyancing costs as well.

Note that it is possible to purchase a home with as low as 5 percent deposit. However, you’d be required to pay Lenders Mortgage Insurance that can run into thousands of dollars depending on the size of your loan.


How to save a home loan deposit?

Most Australians today live paycheque to paycheque and find it hard to stow away any money for their future goals. However, a little bit of financial planning and a lot of discipline is what you need to start building your money nest immediately. Besides, saving for a target is much easier than merely saving some money each month. So, start by figuring out how much you need to save by checking the market price of properties similar to what you intend to buy in the area of your choice. Once you have a ballpark figure in your mind, use this savings calculator to work out how much you need to save each month to reach your goal in a predetermined timeframe.

Take Lin and Jerry’s example. They intend to purchase a home worth $600,000, which means they need to save $120,000 as well as an additional 5 percent to cover the accessory costs. Even if they take advantage of FHOG in their State to cover the additional costs, they will take 5 years to save up the amount if they put away $2,000 each month. But what if the property prices increase during this time? Is there a way Lin and Jerry can reach their goal faster?

Just like Lin and Jerry, if you are wondering how to save a home loan deposit faster, here are some simple yet powerful tips to boost your savings:
 
Make a budget, and stick to it – With your savings target set, it is time to review your income and expenditure to create a household budget. It does not take more than a couple of hours to draw a budget, but the benefits are phenomenal. The aim is to create a realistic plan that allows you to cut down on frivolous spending without compromising on your lifestyle too much.

While preparing your budget, include regular expenses such as groceries, coffee, transport, movies, etc. You must also include all your ongoing debts to get a clear picture of your finances. Once you have everything in front of you, it is time to identify and cut down on unnecessary expenses.

Have you ever thought that sacrificing the $4 Starbucks coffee and brewing your own cuppa at home every day could save you over $1,000 in a year? Cooking your lunch ($5) instead of buying it every day (minimum $10) can save you over $25 a week! Swap the Friday night outing with a movie at home, and you have another $100 (or more) in your kitty each month. Double this for a couple and see your deposit grow quickly!

Here’s an online budget calculator to help you plan your budget quickly.

 
Cut down on lazy tax – Laziness never pays when it comes to money. Compare savings account rates online to shift your savings into one that pays a higher rate of interest and charges the least amount of fee! It is even better if the interest is calculated daily and paid frequently.

Besides, you can save hundreds of dollars by comparing and switching your bank, insurance company, grocery and utility providers! Read more here.

 
Move out of your rented property – Rent is a huge cost you incur every week. However, if your parents could let you live with them rent-free for a few years – you can save over $200 per week, which is huge. In case that option is not available, explore the idea of house-sitting. Websites such as Aussie House Sitters provide an online platform that links homeowners to home sitters.

A regular house-sitting arrangement can last a few weeks or months or even years! All you need to do is find consecutive house sits to live rent-free and build your savings. You might have to pay a deposit for longer stays, which is refundable once the owners return and find their house in the same condition. Read more here.

 
Ask mum and dad for help – Most Australian youngsters depend upon the bank of mum and dad to secure a place on the property ladder. Did you know that, on average, parents put up $85,830 towards their kids’ deposit?

However, “The banks are cautious when it comes to gifted cash. Along with the cash, don’t forget to ask your parents for a gift declaration stating that the gift is unconditional and its purpose to substantiate the gift,” informs [Collins Mayaki], a mortgage broker at HashChing. “In addition, some lenders may ask for proof of genuine savings for at least a few months to assure themselves that you can afford to service the loan,” he adds.

Another way your parents can help you is by using the equity in their home to secure your mortgage. A parent guarantee loan could enable you to borrow more than 100 percent of the property’s price! However, in case you fail to repay the loan, your parents stand to lose the family home. Read more about parent guarantee loans here.

 
Make the most of the government schemes – Earlier this year, the Federal Government introduced the First Home Super Saver Scheme that allows first-home buyers to save for a deposit in their superannuation account. Under this scheme, “Individuals can make voluntary contributions of up to $15,000 per year and $30,000 in total, to their superannuation account to purchase a first home. These contributions, which are taxed at 15 per cent, along with deemed earnings, can be withdrawn for a deposit. Withdrawals will be taxed at marginal tax rates less a 30 per cent offset and allowed from 1 July 2018.”

The First Home Super Saver Scheme is expected to boost the savings of first home buyers for a deposit by 30 percent as compared to a regular savings account.

Taking the cue from the Federal Government, many States have increased the amount of the First Home Owner Grant and introduced stamp duty exemptions and other rebates for first home buyers. Visit your State’s website for the most updated information or contact a mortgage broker to know more.

Saving for a home loan deposit could be daunting at the start. But, with a little bit of financial discipline, it could be the most rewarding journey of your life that would lead you to your first home! However, if you can’t wait to save a 20 percent deposit, a mortgage broker can help you find competitive home loan deals with as low as 5 percent deposit if you are ready to pay LMI. Fill up this contact form to have an experienced mortgage broker contact you.

HashChing is Australia’s first borrower-friendly mortgage marketplace that allows users to compare discounted broker-negotiated mortgage rates from over 60 lenders across Australia, online.

 

By Vidhu Bajaj,
HashChing Content Writer

 

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.

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