How to Save for a House Deposit
As a first-home buyer, saving up a house deposit means achieving the first major milestone of your home-ownership quest, and you’ll want to do this as quickly and painlessly as possible.
Here are some tips to help you on your way.
Set a realistic savings goal
First, saving requires financial discipline, so it’s vital to set a financial goal for how much you want to save and by when right from the outset. Otherwise, your savings regime may well end up being aimless and half-hearted. You should be aiming for the 20% mark, so if you want that property in the $350,000 price range, that’s $70,000. However, you need to be clear from the outset as to what you can actually afford and plan accordingly.
Saving $70,000 may seem like a daunting task, so it pays to be as realistic as possible about what you can save within your chosen timeframe. Once you’ve set your goal, you’ll need to create a budget to see how much of your income you can afford to save every pay. Then choose a savings account with the most competitive interest rate available and arrange for regular direct deposits into that account from a percentage of your salary or your monthly income if you work as a contractor, freelancer, or small business owner.
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Supplement your income
You should also consider ways to supplement your income through things such as overtime in your current job or extra casual, part-time or freelance work. If you’re serious about saving a sizable deposit, you may even want to consider driving for Uber or setting up an e-commerce business to sell things on sites like eBay.
Basically, you should brainstorm with your friends and family ways you can make extra money to put towards your deposit and be willing to sacrifice some of your leisure time to make your goal a reality.
In simple terms, less spending and more savings = a bigger deposit for your home loan in less time.
» Looking to increase your cash flow? Consider these 25 ways to make money online, offline and at home.
Work on your credit score
Check your credit score and request a copy of your credit report so you can get a sense of how lenders will evaluate your home loan application. Take any necessary steps to increase your score, like minimising your debt and assessing your mix of credit products.
Take advantage of government help for first-home buyers
Thankfully, the federal and state governments are keen for as many people as possible to achieve home ownership. The schemes available to assist first-home buyers in their deposit-saving endeavours include:
In January 2020, the federal government introduced the First Home Loan Deposit Scheme as a way to help first-home buyers enter the property market sooner and with fewer barriers. The scheme was renamed the First Home Guarantee in the 2022 federal budget, expanding places to 50,000 per year in the 2022-23 financial year, comprising 35,000 for the First Home Guarantee, 5,000 places for the Family Home Guarantee and 10,000 for the Regional Home Guarantee.
The scheme allows first-home buyers to purchase a property with a deposit as low as 5% without having to pay LMI, with the government acting as guarantor for the loan.
To be eligible for the First Home Guarantee, applicants can apply as either an individual or a couple. You’ll need to be a first-home buyer intending to live in the property for at least six months, 18 years of age or older, an Australian citizen and earn less than $125,000 as an individual or $200,000 as a couple as shown on your tax assessments.
For full eligibility criteria, contact a Participating Lender.
The NSW government is offering a $10,000 First Home Owner Grant when you buy or build your first new home. It can be a house, townhouse, apartment or unit that is newly built, purchased off a plan or substantially renovated. The price of the property can’t exceed $600,000.
The grant is designed not only to help first-home buyers but to stimulate the construction industry. Other states may offer similar incentives, so it’s always best to check with your lender as to what is available.
For full eligibility requirements, go to the Revenue NSW website.
The First Home Super Saver scheme allows first-home buyers to access part of their superannuation if they have made voluntary contributions to the fund. Importantly, you can only access the money that you have contributed yourself, usually through salary sacrifice from your pay, and not the super guarantee, the compulsory employer component.
If you are saving for a deposit, it’s highly recommended that you take advantage of this scheme because it offers highly significant tax incentives. If, for example, you earn $80,000 a year gross or pre-tax and you contribute $5,000 extra to your super, your taxable income will be reduced to $75,000, which leaves you better off than if you had simply saved the extra $5,000 into an account over the same 12-month period. These financials can get slightly complicated so it’s best to talk to a reputable financial adviser or your home loan lender about the tax benefits involved.
There are rules as to how much you can contribute – a $15,000 maximum per year and a total of $30,000. When you apply for a home loan, you simply request the release of these funds from your super fund.
Go to the Australian Taxation Office website for full eligibility requirements.
DIVE EVEN DEEPER
Alan Hartstein
Alan Hartstein
Alan Hartstein
