Tips on saving for a deposit
When buying your first home, saving for a deposit can be super hard, particularly if you’re paying rent at the same time. Here are 5 tips on saving.
How can I save for a deposit?
When buying your first home, saving for a deposit can be super hard, particularly if you’re paying rent at the same time. Many young couples and singles choose to move back in with their parents for a few months while they save money, but this isn’t an option for everyone – either because you don’t have parents living nearby or you simply can’t entertain the thought of shacking up with your parents at the age of 32, no matter how good Svetlana’s beef stroganoff is. Luckily there are some other ways you can save money for a deposit:
One way to save for a deposit is to design a savings plan or set some savings goals for the future. Some people put aside a certain amount each week before budgeting for things like rent, groceries and leisure time; others spend what they have to first (rent, groceries, etc.) and then set aside what they can into a savings account.
One couple I know moved back in with their parents for nine months, before they couldn’t take it anymore, and then they moved to a pretty average, but cheap, rental. They thought they’d be renting for three months max, but were still there more than 12 months later pretending the bolognese stains on the carpet were avant garde.
As property educator Helen Collier-Kogtevs says, if you focus less on what you can’t afford and more on how you can save, buying that first property might not be as out of reach as you think. “I’ve been hearing how property prices are ‘unaffordable’ ever since I can remember,” the managing director of Real Wealth Australia says. “But it’s all relative. I do believe it is still possible to buy property – it’s all about how you spend and save your money.”
Collier-Kogtevs suggests making a budget and sticking to it. And not aiming too high. Saving for a house will seem overwhelming but once you start saving, it will become easier. If you put money aside each week or month, it will start to add up in your bank account.
Don’t try to buy the three bedroom waterside property straight up. “Start with a small property – maybe an affordable investment – and leverage into something bigger down the track once you can afford more,” she advises.
2. Look at your spending
If you’re putting a lot of money on credit cards each month or wasting money on food you don’t eat, then look at freeing yourself from some of these burdens. If you go out for dinner a lot or drinks with mates, then have them around for a cheap takeaway or home-cooked meal with a slab of beer or a few bottles of Aldi wine (the $5 Tempranillo is actually delicious!). Review your phone bill, internet costs and things like health insurance and look at what you can cut back on.
For some savings inspiration, check out our guide to saving $10k towards a house deposit in a year:
3. Look at the First Home Owner Grant and First Home Owner concessions
The First Home Owners Grant, or FHOG, is a state government initiative designed to assist first home buyers in buying property. While you won’t get a discount on the purchase price, you will get a discount on the overall amount you spend and every little bit helps, right? Check out our definitive guide to FHOG, including the grant amounts by state, here.
Another major obstacle when buying property in Australia is the cost of stamp duty. If you’re a first home buyer, there are a number of stamp duty concessions you can apply for in different states which offer a discount on the cost of stamp duty. Check out our guide, here.
4. Question your financial situation
When it comes to buying property, there’s a lot to think about, not only from a ‘where to buy’ perspective but from a home loan point of view: there’s loan applications and interest rates and lender’s mortgage insurance to consider. For a comprehensive look at these things, have a read of our repayments calculator page.
Meanwhile, now is a good time to consider your financial situation and how it might benefit from a few changes. Are you due for a pay rise? Or a new job? Is there a way to get involved in the gig economy and make some extra cash on the side? Uber driving, freelancing, babysitting, dog walking. These are all ways to make a little extra cash that you can put straight into your savings account for a deposit.
5. Consider bridesmaid suburbs
If property seems out of your league, one option is to consider “bridesmaid suburbs” instead of main hubs, says Rich Harvey, CEO of the Real Estate Buyers Agents Association of Australia (REBAA). “They’re called bridesmaid for a reason – they’re not the main show but they’re still within striking distance of those suburbs,” he says.
For those looking in Sydney, instead of trying to buy into highly exclusive suburbs like Bondi, Coogee or Clovelly, you might consider Maroubra or Botany, which still have nice streets and good access to everything. Brisbanites might consider Morningside or Bowen Hills over New Farm or Tenerife.
“With age, they might also become main suburbs. If there’s a school or hospital or entertainment precinct that could give that area a boost, that could influence it too.
Price is going to be the main driver driving people to those bridesmaid suburbs.”
Harvey says this is where a buyer’s agent comes into the property buying equation and can help with finding more affordable places for home buyers.
“A buyer’s agent is constantly looking at the market: where are the really overpriced and overcooked areas and where are the pockets of value, the gems, the nuggets that are a bit unpolished but have potential for growth? They might be near a train line. Where can you get in at ground level that’s still relatively affordable and ride this cycle out over the next 10 years of growth?”
It’s important to note that the information we give here is general in nature – no matter how helpful or relatable you find our articles. Even if it seems like we’re writing about you, it’s not personal or financial advice. That’s why you should always ask a professional before making any life-changing decisions.
Do you know what a first home buyers grant is and what you need to get it? We do and we share the qualifications for each state in Australia. Win and find out if you're eligible now!
One of the major hurdles to buying property in Australia for first home buyers is the cost of stamp duty, which, depending on where you’re buying, often seems almost as much as the amount you’ll need to save for the deposit.