2020 was definitely one of those years that stopped us in our tracks. At times we were forced into new situations, new routines and having to frustratingly press “pause” on some of our goals, financial and otherwise. For many Australians, this included the dream of being a homeowner.
As the new year begins, we’re now faced with the challenge – albeit an equally daunting and exciting one – of rethinking our goals, financial objectives and financial wellbeing in order to make it our best one yet.
If buying your own home was parked for 2020, let’s look at how we can put it back on the table. Here are 5 steps to achieving that all-important house deposit:
Create a budget
This is the most important step and will not only help you build a deposit but can actually help you pay off your mortgage. You will be able to see how much you can afford to save after seeing how much is left over from your after-tax salary and living expenses.
“Once you have established how much you can save, work out how long you will need to build the deposit you require. Ideally aim for 20 per cent to avoid having to pay additional insurance at time of purchasing. However if buying a home is something you want sooner than later, there are home loans which may suit that require less than 5% deposit.” says Mark Lancaster, franchise owner at LJ Hooker Home Loans Brisbane Outer North.
Related Post: A step-by-step guide to securing a 98% home loan
Have a separate online savings account
Make sure this is linked to your everyday account so that you can see it on the screen and nickname it “My Home Deposit”. This is so important because every time you log into your accounts you are reminded as to what you are working towards, and will have greater self-control and motivation when it comes to facing temptations.
Get in the habit of immediate transfers
Once you know how much you can realistically afford to save from each pay cycle, transfer those funds immediately into your Home Deposit Account. The money is then separated from your spending account and placed with purpose towards your financial goal.
What can work well here is to get in early and speak with a Lending Specialist. They can do a full assessment of your financial position and even obtain a pre-approval for you. Once you know how much you can borrow based on your income, you’ll know exactly how much deposit you need.
Related Post: What is a home loan pre-approval?
Review your budget
It’s easy to write out your living expenses and accept them for what they are. However, try asking yourself if you value them or the frequency of them, or even if there are cheaper alternatives. You may start to free up even more money that could be going into your Home Deposit Account.
Practice makes perfect
As you watch your deposit grow start practicing with an imaginary mortgage. This will make the transition from being a saver to a mortgage payer stress free, and help you not only stay on top of your financial responsibilities but pay off your home sooner.
For example, say you are regularly saving $400 per week but you know that your mortgage repayment will be $500 per week. Try and tweak your budget so that you can save an extra $100 per week or more. The benefit will be a bigger deposit, (possibly a smaller mortgage) and you will be prepared for this new level of financial responsibility.
Saving for your first home can at times be painfully slow. But having the right habits, budget, attitude and level of focus will make the process so much more enjoyable. You may even find yourself inspiring others around you with your newfound motivation and determination!
Keen to take the first step?
It can start with a simple planning session. You may not be ready now but armed with a plan and more knowledge you can set achievable goals!
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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice. Credit criteria applies to any loan application.