Saving for a new home or your first home is one of life’s biggest challenges but there are some great approaches to help you achieve you target amount faster.
Saving for a property can take many months, even a couple of years. While it can feel a little isolating, many others are out there in exactly the same position.
It is essential that you fix on an amount you wish to save and have a good idea of the sort of property you want to buy.
Be real, though. Don’t set your sights on a beachside penthouse if you can’t afford it. Maybe you’ll have to get into the market with a small apartment and then work your way up the ladder which is what most people do.
For those earning a good salary, a fair question is why you might need a deposit if you can make the repayments for the total loan you’re requesting.
Banks usually will not grant a loan without seeing some history of financial responsibility.
If you have less than 20 per cent of the loan value for your deposit, they’ll insist on you taking out lender’s mortgage insurance (LMI). This protects them from you defaulting on the loan but costs you tens of thousands of dollars over the lifetime of a loan. So, getting to the 20 per cent goal makes sense and is even more important in these post Royal Commission days.
Here are some great tips to get you in the game.
Set an overall target and time-frame for the amount you wish to save.
Budget for success. Make sure you put aside a set amount of money every week that’ll meet your savings deadline. Don’t make your life miserable, or you’ll risk not sticking to the plan.
Review the big items. If you have rent and car payments, consider how you might be able to reduce these. Perhaps you can move back in with parents so you don’t burn cash on rent. If you’re buying with a partner, question whether you both need cars.
Continually review your plan. Perhaps you can consider taking lunches to work, reducing your takeaway coffee intake, switching to a cheaper supermarket and catching fewer taxis. There’s usually a way to squeeze a little harder.
Take the money straight out of your wages. Set up a bank transfer so you never see it. That way, it’s less painful.
Earn Interest. Put your savings in an account with the highest-earning interest rate. Be aware that sometimes these account lock away your money for set periods of time. So, make sure you can access it when you need it.
Reduce your debts. When banks consider your application, they’re going to bake into their calculation the money you owe and your repayments. Every dollar owed will adversely affect the loan amount you’ll be granted.
Crunch your expenses. Reign in your retail spending and nights out. Scale down holiday plans with a stay-cation. If you must get away from it all, then buy from sites such as lastminute.com or look for great deals.
Kick up cash flow. Consider a second job and be sure to tip any bonuses, commissions or unexpected windfalls straight into your savings account.
Sell what you don’t need. Online sites such as Gumtree and eBay offer a great opportunity to turn trash into cash.