Whether it’s you or your ‘kidults’ (adult kids) trying to enter the property market for the first time, saving up the deposit can seem like an insurmountable challenge. It’s like climbing a mountain. If you haven’t done your preparation and planning in advance, reaching the summit will be a long shot.
The key is to do your research and understand what it will take (including the sacrifices that have to be made and the planning required) to get there. Ultimately it comes down to being clever about both your saving and your spending.
Here are 5 home deposit hacks that will help you (or your kidults) achieve that goal.
- Join the 5% club
95% of people spend first and save later. That leaves just 5% who do the reverse. That’s where you need to be if you are saving for a deposit. Start by creating a budget, accounting for every dollar you spend. And that means everything. The seemingly insignificant $4.50 a day you spend on a coffee is equal to $1,080 a year based on a 48 week, 5 day a week working year. If we’re talking about a couple, that figure would double. Then imagine if you’re spending $12 a day on lunch. No doubt you get the drift. Aim to save around 10% of your wage with the end goal being to save enough to equal 20% of the value of the type of home you wish to purchase.
- Change your priorities
Making sacrifices is necessary when aiming for any major goal and saving a deposit for a home is no exception. Take a packed lunch to work rather than buying it (this will save you around $3000 a year), restrict ordering takeaway or don’t take out at all, even if it means having baked beans on toast occasionally. It’s about changing your priorities to focus on the long-term goal.
- Act like you have a mortgage now
Living the mortgage life before you have one will help you acclimatise so it doesn’t come as a shock when you do have a mortgage. It will also help you succeed in getting a loan approved because you will be able to demonstrate a regular savings pattern in line with mortgage repayments. Work out how much you will be paying on a mortgage based on how much your first home is likely to cost less the deposit you will have saved. Another bonus of putting away fictitious mortgage repayments each month will be that it will significantly boost your savings towards the deposit.
We are currently experiencing record low interest rates and suggestions are they will fall even lower. If you can find a way to save the deposit and get approval in principle on a home loan, commit to making that purchase while median house prices are still low in Perth. If you can’t afford to buy the home you want to live in consider an investment property and have the tenant help build your equity while you are still living at home or flatting with friends to keep your living costs down.
- Take advantage of incentives
There are a number of incentives on offer for first homebuyers from the government and even from some lending institutions. For instance, in WA the First Home Buyers Grant is available for eligible first homebuyers who are purchasing a new residential home or building a home on vacant land. For the purchase of established homes you may be entitled to zero or reduced transfer duty. There are also other incentives that may apply to you. Click here to learn more and for a list of FAQs about first homebuyer assistance in WA.