Your Guide to Saving a 20% Home Deposit and Getting into Your First Home Sooner with Go Mortgage.
Buying your first home is an exciting journey, however, saving for deposit – especially a full 20% – can feel like a daunting mountain to climb. While it may take some time and disciplined planning, a 20% deposit can bring you valuable benefits: avoiding Lender’s Mortgage Insurance (LMI), reducing your loan amount, and even potentially securing better terms from lenders.
However, reaching that 20% goal doesn’t mean you need to put your life on hold. Here’s a fresh approach to help you tackle this milestone, stay motivated, and move into your new home sooner.
1. Get Clear on your Goal and Savings Target
Define Your Budget
Start by researching home prices in the area and property type you’re interested in. Knowing that number makes it easier to calculate your deposit goal. For example, a 20% deposit on a $500,000 property means you’ll need $100,000 saved up. This target gives you a concrete number to work toward.
Remember the Extras
It’s easy to focus solely on the deposit, but first-time buyers often face additional expenses such as stamp duty, legal fees, home insurance, and moving costs. These extras might add another 5-8% of the property price, so factor these in for a more complete financial picture.
2. Separate and Protect Your Deposit Savings
Once you’ve set your savings goal, open a dedicated account just for your deposit. This keeps it separate from your daily spending and helps minimise the temptation to dip into it for other needs. Look for accounts offering high interest or other incentives that can help your savings grow over time.
3. Budget for Success: Every Dollar Counts
A well-thought-out budget can be the backbone of your savings plan. Here’s a practical way to get started:
Track Your Spending: Look over your last few months’ bank statements and categorise your expenses – essentials (rent, utilities), discretionary (eating out, hobbies), and savings.
Set Monthly Savings Milestones: Divide your target amount by the months you have until you aim to buy. This way, you’ll know exactly how much to save each month. For example, if you plan to save $100,000 over four years, set a monthly savings goal of $2,083.
Automate Your Savings: Set up an automatic transfer from your main account to your deposit account right after you get paid. Automating savings turns it into a habit and ensures you stay on track.
4. Prioritise Debt Reduction
If you’re carrying debt, especially high-interest debt like credit cards, focus on paying it down first. High-interest debt eats into your budget and can prolong your savings timeline. By reducing or eliminating these debts, you free up more income each month to contribute toward your deposit.
5. Cut Back on Spending Without Sacrificing Enjoyment
Small lifestyle changes can add up quickly when you’re saving for a big goal like a deposit. Here are a few easy-to-implement ideas that don’t feel like sacrifices:
Cook More at Home: Dining out is often one of the biggest discretionary expenses. Cooking at home not only saves money but lets you explore new recipes and enjoy healthier meals.
Look for Free Entertainment: Instead of spending on movies, concerts, or other outings, try local hikes, community events, or hosting game nights with friends.
Revisit Subscriptions: Cancel or pause subscriptions you don’t use regularly. You might be surprised how many streaming or subscription services are collecting fees without much value to you.
6. Add to Your Savings with a Side Income
If you can, consider picking up a side gig. Even a modest extra income, like $200 a month, can have a big impact over time. Whether it’s freelance work, part-time tutoring, or driving for a rideshare service, a side income dedicated solely to your deposit fund accelerates your timeline without compromising your primary income.
7. Check for First-Home Buyer Programs and Grants
Governments often provide programs and incentives to make buying a first home more affordable. If you’re eligible, these can be invaluable in helping you reach your deposit sooner:
First Home Owners Grant (FHOG)
Some Australian states offer grants to help first-time homebuyers get started. These amounts and requirements vary, so be sure to check your state’s specific guidelines. Read our previous BLOG at https://www.gomc.com.au/queensland-doubles-first-homeowner-grant-to-30k/
First Home Loan Deposit Scheme (FHLDS)
In Australia, this scheme helps buyers purchase a home with a deposit as low as 5%, while the government provides a guarantee to avoid LMI costs. Read More https://www.housingaustralia.gov.au/support-buy-home/first-home-guarantee
First Home Super Saver Scheme (FHSSS)
This allows you to use voluntary superannuation contributions (up to $30,000 per individual) toward a home deposit, providing tax advantages along the way. Read More https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme
8. Consider Alternative Loan Options if Needed
While a 20% deposit is ideal, there are other paths if that target feels too far out of reach. Some banks and lenders offer options to buy with a smaller deposit, and while there are trade-offs, they can get you into a home sooner:
Lender’s Mortgage Insurance (LMI): Some lenders will approve loans with as little as 5-10% down, but LMI will add to your overall costs. However, the benefit is entering the property market sooner and potentially capitalising on future property appreciation.
Guarantor Loans: Some first-time buyers use a family member as a guarantor to help secure a loan without LMI and with a smaller deposit. This can be a great way to buy a home sooner if a family member is willing and financially able to assist.
9. Regularly Review and Adjust Your Progress
Life and finances are always changing, so make it a habit to check in on your savings plan every few months. Adjust for any changes in income or expenses and see if there are new areas where you could cut back or opportunities to save more. These regular check-ins keep you focused and motivated as you watch your savings grow.
Final Thoughts: Every Small Step Brings You Closer
Saving a 20% deposit can be challenging, but by following a structured plan, you’re setting yourself up for success. Remember, even small efforts add up over time, and each step brings you closer to opening the door to your very own home. Think of these saving habits as long-term skills that will continue to benefit you as a homeowner.
Ready to start your journey toward homeownership? It’s time to take that first step, begin saving, and watch your dream of owning a home become a reality.
By following these strategies, you’ll be well on your way to saving that deposit and stepping into your first home sooner. Happy saving!
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