Ten Tips for Saving a Home Deposit
Trying to get into the property market in Australia is not always easy, let alone trying to save 20% to get into the market without having to pay Lenders Mortgage Insurance (LMI). Read more about LMI here. Thankfully, with the current government incentives in place, first home buyers can enter the market with a 5 % deposit, no LMI and stamp duty concessions. Read more about the First Home Buyer Assistance schemes here. So, how does one save for a deposit to enter the property market? In short, discipline, sacrifice, and some good luck!
1. Loan Support Options
Do you have a relative or friend who may be able to assist you with the loan amount? If you are comfortable able to pay back that debt, a loan or a gift from your inner circle is often the quickest way to get into the market.
2. Joint Venture
To minimise the initial outlay of capital on your end see if you can purchase with a partner or friend. This does come with certain downfalls, so the legal arrangements will need to be sorted ahead of time.
3. Work Out The Exact Deposit Amount
Once you have assessed if you can gain assistance from friends and/or family or not, you will need to work out the exact amount of the property you are looking to purchase, then work out the deposit amount.
4. Do Not Waste Money
You will need to establish what is needed vs what is wanted in your everyday life. Change your spending habits to purchase only what is needed. A helpful way to do this is to develop a budget.
5. Sell The Items You Don’t Need
Consider selling items that are no longer used, the items sitting in your garage, cupboards and shelves. Not only will this clear you’re clutter but can add significant dollars towards your deposit.
6. Set Up A Forced Savings Routine
Put a certain percentage of your wage into your savings account each payday, before you spend any money. Make this an automatic transfer to save time. Continue this practice forever.
7. Rent Out Spare Bedroom/s
Now, this step is if your dwelling allows, consider renting out the spare bedroom. This may encroach on your privacy but paying half of your living expenses will add more to your savings than any other savings habit.
8. Consider Eating Out Less
There are monumental savings if you stop the takeout and Uber eats. Instead, opt for cooking at home to save money. As a quick exercise, take a look at your past month of spending on eating out – did the amount surprise you?
9. Consider More Income Generating Activities
If the amount seems too large based on your current income, look at ways you can generate more income such as a second job or starting a side hustle. This is where you turn your passion for something into a business. You may also have share investments in which pay dividends – this is classified as income that can go towards your deposit.
10. Consider Tapping Into Your Super
If your superannuation account has sufficient funds to keep you safe under all circumstances. You could look to use your super to purchase a property if you have a Self-Managed Super Fund (SMSF) set up.
Download the May Property Spotlight Report here
Source: Warren Jacobs – Business Development Manager at Meridian Australia.
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