When you’re scraping by to save for your home deposit, the dream can start to feel more like fantasy than reality.
Australian housing prices are continuing to climb, particularly in capital cities, and the amount you need for a deposit has starkly grown since your parents bought their first house.
However, all hope is not lost. RateCity has compiled a list of new and timeless ways you can save your home deposit faster.
Before you start saving…
If you have debt hanging over your head you need to tackle this first before you can start growing that nest egg.
If you have multiple sources of debt, such as a credit card bill, a car loan and a personal loan, you should look to pay off whichever has the highest interest rate. It can be easy to fall into the trap of trying to pay everything off at once, or try to pay off the biggest debt first, but financial experts recommend approaching debt from highest interest rate to the lowest.
Example: Will has a $10,000 car loan at 8 per cent and a $2,000 credit card debt at 15 per cent. Experts believe he should prioritise the credit card debt, while still maintaining minimum allowable repayments on his car loan.
How to save your home loan deposit faster
This doesn’t just mean buying the cheaper grocery store brand version of your shopping list. You can make some serious savings by downgrading your lifestyle.
One option includes selling your car and choosing to take public transport while you’re in savings mode. Further, if you’re paying more than the recommended 30 per cent of your income in rent, you could consider either moving somewhere cheaper or in with family. Keep your sanity in check by remembering it’s only temporary until you’re in your dream home.
- Term deposits
Term deposits are a classic, but useful savings tool. They involve depositing funds into an account for a fixed term with the purpose of earning interest at a fixed rate, which will prevent you from dipping into your savings. They can either be short-term (less than one year or as short as one month), or long term (anything from 12 months to five years or more).
Example: Jessica puts $20,000 from her savings into a 2-year term deposit paying 3 per cent interest. At maturity, she would have generated an extra $1,200 in interest on her balance.
- Use fintech savings tools
Fintech, or financial technology, is a rapidly growing space that helps people by turning their mobile devices into handy, financial tools. They are a great way to help fast track your way to saving for a home loan deposit.
They can be used for a multitude of purposes, such as:
- Investing – apps such as Acorns helps you to save your spare change by rounding up your purchases to the nearest dollar and investing them.
- Budgeting & monitoring your expenditures – Mint is a money manager that tracks your bank accounts, credit cards, bills and investment, increasing transparency across your finances so you can budget more effectively.
- Parents go guarantor
Crossing that 20 per cent deposit hurdle isn’t always something you can do on your own. If you’re a first home buyer, one option to consider is asking your parents to go guarantor on your loan.
Guarantors allow the equity in their own property to be used as additional security for the home loan. It is a great way to help the borrower get into the property market, however it does come with its own risks. The guarantor does not have any right to the property, and they need to be confident the borrower can pay back the loan, or they’ll lose the equity they offered as security.
- Rent out your spaces
It’s never been easier to make some extra cash by renting out your spare room or whole home through websites like AirBnB or CouchSurfing. These sites are safe and secure and help you to get to know your potential guests through referencing and messaging systems.
Example: If you rented out accommodation for two nights each month at $50 per night, you’d have an extra $1,200 each year.