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SAVING FOR A HOUSE DEPOSIT

Saving A Deposit To Purchase Your Dream Home Is The First Step In The Journey

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Saving a deposit to purchase your dream home is the first step in the journey of First Home buying.  As little as 5% is an acceptable deposit that will secure you a home loan, however 20% is favored by lenders and reduces the overall cost associated with borrowing.

Depending on your past habits, saving can appear either achievable or incredibly difficult.  If you have a good history of saving, then you are on your way. If your past saving efforts have left you wanting, then you will need to make some changes to your approach.

Saving requires discipline and often sacrificing some of the nice things in life that we take for granted.

Everyone’s behavior is different. It is difficult to establish one rule that fits all, therefore it is important that you consider your own personality and recognise your behavior that in the past has prevented you from saving.

TIP Determining areas that you can save relies on you understanding where your hard-earned money is going.  One method available to help you understand your spend and identify your saving opportunity is to monitor your spend by using a diary.

SAVING FOR A HOUSE DEPOSIT
SAVING FOR A HOUSE DEPOSIT

For some individuals saving is not difficult, however refraining from spending is another story. None of us find it difficult to find ways of spending our savings.  Once our bank account is showing a healthy balance it is not difficult to convince yourself that we need to upgrade the car, buy a bigger slimmer television, or join some good friends on a great holiday.

If historically you have found it difficult to refrain from spending your savings than it is important that you put the money out of your reach.  Setting up a separate account specifically for your savings could be the answer to your problem.

Another important consideration is the flow of additional money that can occur over a period of 2 to 3 years.  We consider additional money as, any amount of money, that was not included in your initial calculation, that determined your saving amount. Depending on your specific situation, this can be additional income through a bonus, a gift from an immediate family member, a saving in your existing expenditure or the sale of an asset like a car or caravan.  We refer to all forms of additional money as Bonus Savings.

Depending on your family situation, you may have parents, siblings or relatives, that may be willing to help you in the quest of purchasing your first home.  Lending institutions are willing to accept money that is gifted as part of a home loan application.  There are several ways this can be achieved some that are more helpful than others. This is considered in more detail in the Family Gift section.

TIP Saving for a deposit is best achieved when you have an objective and a plan to achieve your objective in place.  The objective is “How Much Do I Need to Save”. The plan details how you are going to achieve your objective.  Every plan should include a timeline and should be measurable. Whilst your objective might be to save $100,000 in 3 years, you will also need to set smaller objectives that allow you to monitor your progress along the way. For example, you may set objectives by month, quarterly, half yearly and then yearly.  This allows you to measure your progress regularly. You can feel confident, that achieving monthly and quarterly objectives is incredibly motivating and inspiring, therefore make sure your targets are achievable but challenging. Remember, a deposit for a home is achieved by lots of small steps within the journey.  Every time you achieve a small milestone, take the time to celebrate, providing it is within your budget!

SAVING FOR A HOUSE DEPOSIT