Need help saving money for a house deposit? Here’s some budgeting tips to help get you there faster.
Whether you’ve already got some money for your dream house stashed away or you’re in the beginning stages of saving for a deposit, it’s never too late (or too early!) to use a budget to help you save money.
A budget not only gives you clarity around how much money is coming in and how much money is coming out, it will also give you a clear action plan for how to move forward. Your budget will be able to tell you how much money you’ll need to achieve your saving goal, and how long it will take you based on your current situation.
Here’s some essential house deposit budgeting tips:
1. Decide how much deposit you’ll need
This is key, as it gives you a figure to aim towards. Most lenders ask for an absolute minimum of 13% of the value of the house, though many of the bigger, more traditional banks will require more than that. If you can, aim for around 25%, as this generally means you won’t need to pay Lenders Mortgage Insurance – otherwise known as LMI, this is a one-off payment that covers the lender against any loss if you’re no longer able to make loan repayments.
2. Record your monthly expenses
Choose an online budgeting tool that suits your style (some people love recording manually via a spreadsheet while others prefer apps that do all the hard work for you) and use the tool to enter your monthly income and expenses. Your expenses should include your rent or mortgage repayments, car repayments, gym memberships, insurance, phone and internet, and regular subscriptions like streaming services.
3. Track your spending
Once you know how much money is coming in and going out, it’s time to scrutinise your spending. Spend at least two months tracking how much you spend on both regular purchases (like petrol for example) and irregular purchases (dinners out) and work out what’s feasible to cut out. You may even find that you’re paying for things you no longer need, like subscriptions. Saving money for a house deposit may not be easy to begin with but as that bank balance starts to grow, you’ll find it’s actually quite addictive.
4. Deal with your debt
If you have any debt, it’s best to get rid of this as quickly as possible. Minimising your debt sooner rather than later means you’ll pay less interest on the loan in the long run, which will mean more money towards your dream home. If you have multiple debts, check to see if you can consolidate them – this could help reduce the fees you’re paying.
It’s also important to remember that if you minimise your debts, this will allow you to borrow more for a home loan, as every $10k of credit card debt will reduce your borrowing capacity by approximately $100k.
5. Use a high-interest savings account
Shop around for a savings account with a high interest or consider a term deposit. You’ll end up earning more interest over time compared to a transaction account.