Save money for your home loan deposit faster

Finance Oct 16, 2017

9 min read

It can be really hard to save money, even if it is for something as amazing as your first home. It’s hard to deprive yourself of the things you like doing, cutting back on nights out with friends and just generally living the frugal life.
Here are our top five tips to save your deposit faster.


Tip One: Work out how much you need to save

We think this is really important. Set yourself a goal and start working towards it. Once you start seeing the dollars add up in your savings account you’ll be even more motivated to save money.

According to July 2017 data released by REIV, the median house price across Melbourne is now $822,000 – so a 20% deposit is going to mean you need to save $164,000. Of course, there are houses both above and below the median – your deposit is going to vary based on how much to plan on buying for and how much of the purchase price you want to borrow (known in the industry as loan to value ratio or LVR).

If you are planning on saving a smaller deposit and borrowing more – for example putting down a 10% deposit and borrowing 90% – then you may find you have other expenses to cover down the track. This includes things like Lenders Mortgage Insurance (LMI), higher interest rates or a smaller selection of lenders that will offer you finance impacting the options available to you.


Tip Two: Look at what you’re spending and reduce it

A bit of a no brainer really, but unless you actually look at what you’re spending you’re not going to have a good idea on where you’ll be able to save. There are lots of apps that can analyse your spending habits along with comparing your income and expenses – check out our blog here on some we found. Work out what you’re spending and then what you are going to cut out to save money.

You certainly don’t have to eat 2 minute noodles for dinner every night but look at things like reducing how often you eat out, your grocery bills, pay down any debt you have like personal loans.

Look at any auto-debits coming out of your account too and cancel any that you no longer use (yeah, we’re talking about that poor old gym membership).

Other tips to reduce your debt includes:

  • Cut up and pay off your credit card – interest charged on repayments is killer, and will not get any better unless you are no longer spending.
  • Get rid of your car and use public transport – the average Aussie car costs $8,000 per year to run and insure, a huge expense!
  • Sublet a room/take on a boarder – if allowable in your lease, taking on a boarder for a short period of time to help reduce the rent you have to pay.
  • Cut back on holidays and trips away – not a very fun prospect, but if it your goal is getting into your own home sooner then it’s a good sacrifice to make.


Tip Three: Save money by moving back in with family

Maybe not the most popular tip or perhaps the most independent thing to do, but the money you’ll save in rent each month will be totally worth it. Consider this, if you’re currently spending what most Melburnian renters are spending then it’s around $420 per week. Or $21,840 per year. If you did nothing else and saved that rent each week you’d be well on your way to getting your deposit sorted.

If moving back home is not an option, you could compromise on location and find rent that’s a little cheaper the next suburb over, or even look at share-houses as an option. If you go from $420 per week down to $380 per week in rent, you have yourself an annual saving of $2,080 that you otherwise wouldn’t have had in the bank.


Tip Four: Try a term deposit or investment

Once you’ve got a few thousand saved you could start looking at term deposits. These are great if you sometimes struggle with self-control. You’re essentially locking your money away for a fixed period of time, and often the longer you lock it in for the better rate of return you’ll see.

There are lots of different options at different banks to choose from, many of them offering different rates based on the length of time you fix your savings in for, how much you have to deposit and what special offers they have available at the time.

You could also look at investing the money in shares or stock, micro investing like Raiz or something a little different like BrickX that let’s you purchase “bricks” of properties they have available.

We always recommend doing your due diligence before making any decisions on investing.


Tip Five: Get some help from a family member

There are two ways you might go about this.

The first is a cash gift. It’s actually very common and many family members are happy to help their loved ones realise their dreams of property ownership. A cash gift is a non-refundable contribution that goes towards the purchase.

The other way is what’s called a family guarantee. This won’t help you save money any faster, however it can mean saving for a shorter period of time and requiring a smaller cash deposit. Essentially how this works is a guarantor is somebody who secures your loan by putting their own property as security.

Rather than needing to have the entire deposit in cash, you might be able to secure all or part of this in the form of a guarantee. This can mean the difference between paying Lenders Mortgage Insurance or not, potentially saving you tens of thousands of dollars.


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