HOW CAN I START SAVING FOR A HOUSE?
Buying a home? Good for you! But before you look at listings, check how much money you have in your account. If it’s still lacking, don’t worry! We have handy tips to help you save and buy your dream home.
Figure out your finances first.
Be realistic.
Figure out what you can afford with your budget. You might need to consider a smaller or older property or a house in a different area. It’s important that you know your capacity so that you don’t spend outside of your means.
Know how much you can afford to borrow.
At this point, you might want to ask a bank or broker, just to see how much you can afford to borrow. Once you know this, you can figure out how much you can spend on a property and how much deposit you need to prepare.
Check property prices.
Get a good idea of property prices in the area you want to buy in. Here are things you can do:
- Visit open homes
- Look at listing websites.
- Read the property section in the local newspaper.
Figure out your loan to value ratio.
In order to know how much to save, check your loan to value ratio. Lenders use the loan to value ratio (LVR) to gauge how risky it is to give you a loan. You can calculate this by dividing the amount of your home loan by the purchase price or appraised value of the property. Usually, the higher the LVR, the higher the risk that the lender won’t be repaid in case you default on the loan and they need to sell the property. A high LVR also affects your chance to refinance your loan down the track.
Come up with a saving system.
Once you figure out how much you need to save, you must now start saving!
Set a goal and stick with it.
Set your goal. Save the amount you need for the deposit. You can break it down by weeks or months, depending on how you get paid. You can use a savings calculator to know how much you need to save monthly to reach your goal. While it may be hard sometimes, do your best to stick or even go beyond this goal.
Do a budget.
Budget your money, to see where you can cut back on expenses. List down essential costs, such as bills, food, and rent and portion it immediately. Also, store away some money for emergencies. What’s left is what you can save for your deposit. But don’t forget to treat yourself every once in a while, as a reward for saving!
Cut down on the rent.
You might be wondering how you can do that, but there are a lot of ways, really. Here are some of your options:
- Move back in with your parents. Swallow your pride for a few months to cut back on rent, and maybe some of your grocery expenses, too.
- Get a flatmate. If you really don’t want to or you can’t move back with your parents, you can advertise for a flatmate so you can share the rent and bills with someone.
- Downgrade. You can move to a sharer’s flat with six other people. That way, rent is sure to be cheap.
Get an automated high-interest savings account.
Leave your money where you can’t easily get it and where it can earn interest. Your regular account can’t do that for you, so think about setting up a savings account where there’s bonus interest every month you don’t make a withdrawal. Aside from that, you can set up automatic transfers online, or ask your work’s payroll person to automatically deposit a set amount to the account.
Investing might be a good idea.
If you don’t plan to buy a home immediately, consider investing in shares or a managed fund. This way, your money will grow in a few years, sometimes without you even knowing it. So when the time comes, at least you’ll have a sizeable amount for your deposit.
Consider getting another job.
While it’s important to cut down on expenses, why not look for ways to add to your income? If you're in your job for a few years and you know that you’re a valuable asset to the company, ask for a raise. Aside from that, you can have some side jobs such as pet sitting, driving for Uber, and the like.
It might be a little hard, but just think of the payoff: your dream home! If that doesn’t motivate you, we don’t know what will. If you ever need property advice or other tips, just leave a message in our social media!
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