Fast ways to build your home deposit
Develop a plan to help you save your deposit. Work out how long it will take you to save the amount you need, and how much you'll have to put aside each pay.
Set, plan, track and manage your savings goals
Work out how much you need to save. How long would you like it to take? From here you can work out how much you should be setting aside each month.
Most people can get started with $15,000 - depending on what you want to buy. We’ve helped many clients who’ve got at least $15,000 saved build their first home when they believed they had to wait 6 months or more. However many are in a position to buy within a few weeks because they either:
Aim to have at least 5% saved as a deposit – some banks will give you a home loan if you have at least 5% of the purchase price saved (if the home you want to buy is $500,000, a 5% deposit is $25,000). A bigger deposit can be better as it increases your buffer, reduces the bank’s risk and reduces the cost of Lender’s Mortgage Insurance (LMI). LMI is a one-off insurance payment that is paid by you to protect the bank when you have less than a 20% deposit.
Cut back on the extras
The easiest way to see where you can cut back is by doing a budget. Write down your essential costs, such as rent, bills and food, and subtract this amount from your income. What is left over is what you could potentially save for your deposit. You can use our budget calculator to help you break down where it is all going and where you are spending on things that don’t matter.
Click here to download a free copy of Citrus Finance's budget spreadsheet to get you started.
Tracking your personal expenses
Give yourself some leeway - if your budget is too tight, it will be harder to reach your target. So don't cut out all your fun expenses. It's a good idea to set smaller savings goals along the way and reward yourself with low-cost things you enjoy when you achieve them.
Small changes can make a big difference to your bank balance. Change one thing you do regularly and you could save money. Some examples are:
Move back into the family home
While it may not seem that appealing, many young people choose to move back into the family home while they are saving for their first house. Rent is likely to be one of your biggest expenses, so if you can cut this right down, you could increase your savings very quickly.
Get a high interest savings account
Once you know how much you can save, make your money work for you. If you leave it in your everyday transaction account, you might be tempted to use the cash. You will also earn less interest than you would by transferring your savings to a high-interest savings account. If you find a savings account that offers bonus interest for every month you don't make a withdrawal, you'll be less likely to touch the money unless it's an emergency.
Automate your savings
Boost the balance in your savings account by transferring money to it as soon as you get paid. You can set up automatic transfers to your savings account online, or you can also ask your payroll department to send part of your pay to your savings account.
Automatic transfers allow you to 'set and forget', knowing that your savings are growing without you having to transfer them manually every time you get paid.
Buying a home is a big step and it's easy to be daunted by the large sums of money involved. With careful budgeting, saving money towards your own home is made much easier.
Note. The information provided above is general advice. For advice specific to you and your situation speak to Citrus Finance before deciding on the best course of action.
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