How to Start Saving for your First Home Deposit
Our in-house home loan specialists at Resolve Finance have given us a few tips to help you get the ball rolling.
One of the many things that lenders look for when you’re applying for a home loan is whether you have a deposit, which is often in the form of savings. The amount of savings required and the form it’s required in, like ‘genuine savings’ (money saved in your bank account regularly over a specified period of time, usually 3 months) varies depending on the lender you go with, but there are some general tips that will be useful to get you started. Plus the good news is there are some additional benefits if you want to build your home from the ground up (it’s called the First Home Owner’s Grant and we’ll get to that later).
Setting Your Personal Budget
Firstly, most lenders require you to have at least a 5% deposit, which generally must be made up of genuine savings rather than a loan, though there are low and no deposit options out there too. Obviously the more you can put down as a deposit, the less you'll have to borrow and therefore the less interest you'll pay over the lifetime of your loan – that’s better for you long-term! So it’s important not to skip the budget planning stages and think you'll just 'save as much as possible' – set up specific and achievable goals! Let's face it; you won't be willing to stay at home every weekend eating microwaveable noodles.
Use Simple Savings Tools
Technology has made budgeting easier to manage. If you have trouble keeping track of things, there are a couple of popular apps that can help:
● Expensify: Great little app that's 100% free. Loads of options, web interface also available, and you can even scan and keep receipts on the go.
● Mint Bills: Quick and easy way of logging your expenses made by credit and debit card.
● Daily Budget: If you struggle keeping up with day to day expenditures, this app will keep you on track.
Setting Money Aside
Once you know how much you need to save on a weekly basis you could consider setting up additional accounts with your bank which are for different purposes, so you might have one for everyday living expenses, one for rent and emergencies (or things that pop up that you’ll need money for quickly) and then your savings account. That way you’re more disciplined in your spending and saving approach, but it doesn’t work for everyone and you may need to factor in any additional account fees that the lender might charge too before setting up more accounts.
Taking that particular approach in more detail, you would have the following three accounts:
1. Your current account for day to day expenses
Keep your weekly budget for food, transport, maintenance (think haircuts), gifts and all your other living expenses in here. Try as much as you can to make a comprehensive list of all the necessary items you spend money on regularly so that there are no surprises and you put enough money aside in this account so that you don’t dip into your others.
2. Your rent, bills & emergencies account
This one’s for your rent and regular payments like bills and insurances, so as soon as you get paid, put in your rent and other major expenses so you won’t be tempted to spend them elsewhere! If you can afford it, it’s always handy to have some extra cash stashed away for a rainy day too.
3. Your savings account
This is where you put your savings that you’ve calculated you need – and don’t touch it! You may not know that while most lenders will be looking for some amount of genuine savings for your deposit, most will also want to see that you’ll be able to meet your home loan repayments. Being able to comfortably put away a regular amount into your savings account may be one way of demonstrating this to your future lender.
These are just a taste of the kinds of things you can consider when setting up a savings plan to get onto the property ladder. And we know it can be hard to get started and keep motivated, so we have a great program called My Home Plan.
Get Savings Help with the My Home Plan program
The program is exactly designed for people that need some help with how to structure their savings and keep them committed along the way (no blowing it on trips to Bali!) If you sign up on the program – and there is a cost involved – you’ll get access to your very own finance coach. They will design your plan around you – your goals and what’s realistic with your lifestyle and income. And they track your progress along the way giving you gentle nudges to keep you on the straight and narrow. You’ll also get some perks towards building a new home with Homebuyers Centre, which will keep you motivated! Talk to us about what’s involved.
Use the First Home Owner's Grant
The West Australian Government’s First Home Owner Grant (FHOG) gives first time buyers a whopping $10,000 when you’re building your own home and will waive stamp duty for house and land valued up to $430,000. While $10,000 usually isn't enough for a full deposit, and it’s only able to be used in some circumstances through certain lenders, it's a hefty chunk of change that will help you get there!
Speak to a Resolve Home Loan Specialist
We strongly suggest using Resolve Finance who can help you with all these questions and more, including arranging your home loan for you – they’re the experts in construction finance and will look after you throughout your home build journey and beyond. Buying your first home may be closer than you think!
Have you got your savings sorted and want to get into your first home? We can help, ask us today!