Your Game Plan for saving for a Home Deposit
Is it your dream to live in your own home? Buying your dream home is an exciting new beginning into the next phase of your life. But it also comes with responsibility – in planning for it over many years, and in saving for a home deposit. There are major decisions to be made and you may need to adjust your lifestyle to achieve your goal.
You’re going to need a game plan - it’s time to hustle and think strategy. Here are some steps you could take that could ultimately add up to managing your finances and saving enough to start the buying process.
Kick things off with a clear budget
Planning for your home without a budget is like travelling to a new state or territory without a GPS – you need to know where you are, what your destination is, and how you are going to get there. Budgeting is an important part of starting your journey to owning your own home.
A good budget lets you know how much you spend, plan your savings goals, and strike the right balance between your savings goals and your spending needs. You could start off with a budget planner, which lets you translate your goals into actionable plans, giving you clarity on where you stand and where you would like to be.
Calculate your mortgage
Home loans come in all shapes and sizes, such as variable rate loans, fixed rate loans, line of credit, interest only loans, guarantor loans etc. Use of a mortgage calculator lets you have a clear idea of how much your mortgage repayments could be, the amount that you could borrow, and identify ways to repay your loans faster. And more importantly, you may be able to make up your mind on the kind, size, and location of your planned property when you put pen to paper and calculate your mortgage.
Know the property market
Saving for a home deposit starts with knowing what is happening in the property space, how things may shape up over the months and years ahead, and what could be in-store in terms of expenses and outlays. Knowing the pulse of the market well ahead of your planned purchase helps you make informed spending and saving decisions. So research different areas and subscribe to real estate news and you’ll be on your journey from novice to expert in no time.
Open a dedicated savings account
You may have a separate transaction and savings account as part of your regular banking, but it is a good idea to open a savings account specifically towards saving for your home deposit. A home deposit is a considerable part of your savings, and it takes time and deliberate action to build your savings up to what you would want to invest as your home deposit.
Your home deposit is typically 20% of your home purchase price, and you’ll also need enough to cover ongoing costs required with your home purchase. Having a bigger deposit is ideal, as this would bring your loan-to-value ratio (LVR) lower, bringing your overall costs down significantly. Having a dedicated savings account for home loan and deposit purposes makes sure that you do not mix up your spending and savings accounts, and you could be better able to keep your spending within your means.
Leverage your car
A car is an expensive investment high on running costs including registration, insurance and maintenance, and also tends to be high on depreciation. Why would you want to increase your spend on a depreciating asset when you would rather save for your home deposit?
With one car, you stand to gain both ways – apart from channelling your cash flow onto your home deposit, managing with your better half on the same car makes for an opportunity to spend some quality time together.
Save on your rent
Now that you have made up your mind to move to a place of your own, you may as well consider if short-term compromises on your temporary abode could make you richer for the home that you buy!
For instance, it could be a shift from a $450 home to a $350 apartment, or probably a move from your favourite locality to a suburb with less housing demand. Remember, you are progressing on your path to owning your dream home, and some sacrifices for the moment may well be worth it when you look back from your own property that you have worked so hard for!