The past 30 years have shown us that house prices generally double every 7-10 years. This makes it more and more difficult for first home buyers to get their foot in the door of their very own property. Here are some tips to save for a house deposit for potential home owners low on funds but high on motivation to buy their first home.
Create a budget – ensure that you are in a positive cash flow position with more money coming in than going out. If not, cut back on unnecessary items and start curbing your spending habits. If your mobile phone bill is excessive, change to a pre-paid plan, move in with your parents or reduce the amount of money spent on eating out and entertainment.
Writing down your spending behaviour – Remember that budgets usually reflect 20% less than your actual spending. By writing down what you actually spend your budget will be more realistic and and you will be able to analyse where you are spending more than you should or where you are shortchanging yourself in regards to necessary items like food or transport.
Get rid of credit card debt – The high interest rates on your credit cards mean that you should pay these off first before you start to save. It may delay the process but just as credit card debt snowballs in the wrong direction, when it is moving in the right direction it goes just as fast.
Pay your investment first– Saving for a house deposit also includes dedicating an affordable amount into your budget to go towards your house loan savings. Pay this first, bills second and only spend what is left over. Getting into a regular habit of putting money aside will put you in good stead when you do get a mortgage.
Make the most of your savings – Chose a premium savings account and preferably one that has a high level of interest and low fees. You may find separating your accounts into spending, expenses and savings makes it easier to save and get together a house deposit.
Understand how much you need to save – there are always unexpected costs that creep in at settlement so it is a good idea to find out what these are and have an extra $5000 up your sleeve to prevent the deal from going unexpectedly pear shaped.
Keep an eye on the market – This is vital. Start to investigate the trends in the market so that you understand what you should be paying when you are ready to make your purchase. Go to open house inspections and start looking at real estate websites to get a feel for the market.
Getting together a home loan deposit can be tough, especially for first time buyers but by following these tips and being patient, you will be able to save for a home deposit and develop good financial management skills in the process. Whatever your circumstance, putting aside money each week and being realistic about the property market and what area you can afford to buy in will get you into the property market a lot sooner than you think.0