There could be any number of factors niggling in the back of your mind about buying your first place. Parental pressure. You want to build equity (once you Google what it means). Or your housemate took your last mi goreng. Again.
According to realestate.com.au it takes the average single person nearly 10 years to save a 20% house deposit . You’re probably thinking, “I don’t have that long…and who says I’ll be single in a decade?!”
While it won’t be as instant as those delicious stolen noodles, there are ways to be saving for a house while renting – and even ways to get around paying the 20% deposit.
Here are ME’s top tips for saving for a home deposit.
Set a goal – and then set mini-goals.
Creating a goal to work towards makes it a tangible thing, rather than just randomly putting money aside and hoping for the best.
Not sure how much to save for a deposit? Do some research into what type of property you want to buy, where you’d like to live and what 20% of that looks like.
It’s a lot easier to go for a few casual jogs than running a marathon, so instead of constantly focusing on that 20%, think about mini milestones and even reward yourself for reaching them.
Save on rent.
Unless you move back in with the parents or match with a millionaire on Married at First Sight, you’re stuck with paying rent – but there are ways you could cut back.
If you’re living alone, consider moving back into a share house. It could be the last time you do it and something you might enjoy knowing it won’t be forever. If you’re passed the housemate stage, you could downsize into a studio – a small apartment usually in a large open room – which is considerably cheaper and still usually located close to the action.
Generally the closer to the city you are, the more you’ll pay. By renting a place further out that’s close to a train station, you can cut down the rent without adding too much to the commute.
Or negotiate your rent – you could offer less to stick around if the market’s right, or negotiate a longer contract and try to cut $10-20 off a week.
Save on bills.
Take advantage of a competitive utilities market, by sussing out the competition’s offerings or even negotiate with your current one about a better deal. You’d be surprised by how much you can save, and often the discounts don’t just stop on the bills – with some giving away Gold Class movie tickets just for paying on time. (This is a handy cheap night out when you’re saving for a first house deposit.)
If you’re close to the end of your phone contract, consider sticking it out with the current phone and going month-to-month on a new, much cheaper contract. If you can go without the pain of missing out on the latest release’s slightly bigger screen and…usually that’s about it.
Save on savings.
Keeping on top of bills, day-to-day expenses and emergencies (while still maintaining a social life) is one thing. Saving for a house can be the brick that knocks over the house of cards.
Having a separate account for the deposit will give you a clear understanding of where you’re at and make it one step harder for you to hack into.
Plus if you open a high interest savings account, your money will earn itself. Check out ME’s savings rates here .
Save like a boss (not your mate).
You know your friends that are going out for cocktails every Saturday night? The ones who hit F45 all week to sweat out said cocktails? Yeah, those ones who justify their 7-course degustations with their F45 classes?
They’re probably not saving for a house.
It’s not to say you shouldn’t enjoy some of these things, but probably not all of them. If you cut one night out a month ($100+), one takeaway a fortnight ($30) and shred at a regular gym instead of one of the fancier cultier ones ($20 instead of $50 a week), that’s an easy $250 a month – before you even start putting funds aside.
Can’t save a 20% house deposit? Be saved by LMI.
Consider getting into the market sooner with a smaller deposit (you’ll need at least 5-10%) by paying Lenders Mortgage Insurance. This is a fee paid by the borrower (you) to protect the lender (the bank) against any potential loss if you are unable to repay your home loan.
It can be paid upfront as a one-off fee, or be built into your home loan repayments – and the amount varies depending on the lender.
For some people, they’ll be better off renting for a longer period of time and saving up the full 20% – but for those who don’t want to share their mi goreng anymore, it’s something to consider.
Find out more about LMI here.
Save this article.
Even just by reading this, you’ve already kicked off your savings journey. You’re serious about saving – and you know the payoff will be worth it.
This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.