Saving for a home loan deposit whilst renting may seem out of reach, but, as the old saying goes, ’where there’s a will, there’s a way’.
If you plan on saving a 20 per cent deposit, you’ll most likely need to save tens of thousands of dollars whilst managing your living expenses.
Of course there’s now the federal government’s salary sacrifice into super option, which will help many first home buyers save up to $30,000.
But to help you really get the ball rolling we’ve pulled together some simple tips and tricks to help you boost your savings whilst still being able to enjoy the lifestyle you’ve become accustomed to.
You will need to assess your current financial situation and spending habits.
Use bank statements and receipts to monitor your spending over an average month, make a note of regular expenditure, then go into greater detail to see how much you spend on luxuries.
Once you know where your money is going you can start to budget and make a plan for saving.
Ideally, you’ll want to save at least 20 per cent of the purchase price of the property you’re interested in as your deposit.
If your bank or lender is loaning you more than 80 per cent of the purchase price, chances are they’ll charge you lenders’ mortgage insurance to protect themselves.
Budgeting is all about planning.
Setting money aside at the beginning of the month for anticipated costs will prevent nasty surprises that cause you to dip into your savings.
Make sure you set yourself realistic goals, that way you’ll be able to feel good about your savings and track how you’re going month to month.
Here are some tips to help you stick to your budget and boost your savings:
* Buy and cook food in bulk… plan your meals in advance
* Skip your morning coffee from the expensive cafe down the road
* Save your coins – you’ll find you have a substantial win after just a few months
* Put your tax refund straight into your savings account
* Quit the gym and exercise outside for free.
* Negotiate on prices at markets and on big ticket items like white goods.
* Maximise your savings by moving them into a high interest earnings account
Some lenders will accept rental payments in lieu of genuine savings because your ability to pay rent on a fortnightly or monthly basis is reflective of your ability to meet your mortgage repayments.
Take advantage of this, when property prices are high, particularly in metro locations, you may well be paying more in rent than you would be in mortgage repayments on a typical loan amount.
For this reason some lenders are willing to accept this form of genuine savings.
You will just need to show a rental ledger/tenancy agreement from a licenced real estate agent that shows you’ve been making your rental repayments in full and on time for a minimum of 3 months.