Record low interest rates and new government incentives have made it possible for first home buyers to enter the market, but saving up for your first deposit can feel like a small mountain to climb.
Domain recently published a survey revealing that it can take couples aged 24-35 six years or more to save for a 20% deposit in Australia’s capital cities.
The survey shows that it can take more than six years to save a 20% deposit in Sydney and Melbourne, while Brisbane’s first-home buyers can get the job done 18 months earlier.
The saving challenge is similar for all the other capital cities except Darwin, where the barrier to entry is much lower at just 18 months.
If you’re a first-time buyer, setting a savings goal that is likely to require years of saving can feel overwhelming, so we’ve pulled together 12 tips to help you accelerate your deposit saving progress:
- Set an overall target and timeframe for the amount you wish to save.
- Budget for success. Make sure you put aside a set amount of money every week that’ll meet your savings deadline.
- Don’t make your life miserable, or you’ll risk not sticking to the plan.
- If the challenge feels too big, discuss whether your family might be able to be the guarantor for your loan, or a percentage of it. This can alleviate the need to save for the full deposit. However, this is a big thing to ask and obliges your guarantor to be responsible for your loan.
- Review the big items. If you have rent and car payments, consider how you might be able to reduce these. Perhaps you can move back in with parents so you don’t burn cash on rent. If you’re buying with a partner, question whether you both need cars.
- Take the money straight out of your wages. Set up a bank transfer so you never see it. That way, it’s less painful.
- Earn interest. Put your savings in an account with the highest-earning interest rate or consider an alternative wealth strategy like shares with the help of a financial advisor. Ensure you can access your funds when you need them.
- Reduce your debts. When banks consider your application, they’re going to bake into their calculation the money you owe and your repayments. Every dollar owed will adversely affect the loan amount you’ll be granted.
- Crunch your expenses. Reign in your retail spending and nights out. Scale down holiday plans with a stay-cation.
- Kick up cash flow. Consider a second job and be sure to tip any bonuses, commissions or unexpected windfalls straight into your savings plan.
- Continually review your plan. Perhaps you can consider taking lunches to work, reducing your takeaway coffee intake, switching to a cheaper supermarket and catching fewer taxis. There’s usually a way to squeeze a little harder.
- Sell what you don’t need. Online sites such as Gumtree and eBay offer a great opportunity to turn trash into cash.