Saving to buy a house? You’ll have more options with a larger house deposit
Your house deposit is just one of the costs you need to consider when saving money for a house. Other costs include stamp duty, legal fees, removalist plus money for furnishings and the list goes on. Let’s take a look at how you can save for that dream home faster.
Work out what you’re saving for
The best way to save for a house is to have an idea of what you’re saving for. This will not only give you a clearer picture of your end goal, but will also help your lender in giving you an estimate on your borrowing power and affordability. So consider, are you after an established home, townhouse, apartment or something off the plan? Do your research to be fully informed on each type of dwelling so you can inform your lender with confidence about what you’re looking to purchase.
Set a goal
Set an amount you would like to save and a timeframe to save it in. This will help keep you on track with saving money for a house. A deposit of 20% of the property price is generally required by most financial institutions to avoid lenders mortgage insurance. Lenders Mortgage Insurance (LMI) is a cost imposed by financial institutions to protect themselves against ‘high risk’ loans. Any loan that is greater than 80% of the property value is considered ‘high risk’. You will need LMI if you’re borrowing more than 80% of the property value.
Set a budget – and stick to it!
Take a look at your income and expenses, if you’re spending more than you earn now is a good time to cut back! Regular dinners, coffee outings, direct debits and other subscriptions/memberships are costly and will hinder your savings goal. Use our budget planner to get you started.
Making regular deposits into a savings account that’s not an everyday account and will normally pay a better interest rate is critical to your savings success. A Reward Saver account is great example. If you get paid weekly, your savings should also grow weekly. This takes discipline and effort however saving to buy a house = owning your own piece of the property market. Worth it!
What else can I do?
Doing all the above but feeling like it’s still taking forever to get that house deposit? Here are a few other options to try:
• Move back in with parents or relatives
• Pick up casual work on top of your current job
• Limit the amount of times you go out in a month by picking and choosing between social commitments
• Need some time out? Go away for a short weekend trip rather than long interstate or overseas holidays
• Any extra funds that come your way should go straight into savings
The important bits to take away
• Be clear on exactly how much you need to save
• Keep a budget to show where you’re spending and saving. Use our budget calculator to help.
• Higher interest savings accounts will reward you for saving (and not withdrawing!)
• Moving back home may sound drastic, but will help you reach your end goal much faster.
Looking for more advice on how to save for a house deposit? Get in touch with Horizon Bank today and let us help you on your journey.
The content in this article has been prepared by Horizon Bank for general information only and it is not intended to be professional advice. It does not take into account your objectives, financial situation or needs. You should seek your own legal, accounting, financial or other professional advice where appropriate, and consider the relevant Product Disclosure Statement and Terms and Conditions before deciding whether to acquire any products or services offered by Horizon Bank and/or its affiliated partners. We do not recommend any third party products or services referred to in this article unless otherwise stated and we are not liable in relation to them. Any links to third party websites are for your information and we do not endorse any content on those sites. Horizon Credit Union Ltd ABN 66 087 650 173 AFSL and Australian Credit Licence Number 240573 trading as Horizon Bank.