Owning your own home is one of the life’s great achievements, but it is more of a marathon than a sprint event. Purchasing your home should be part of your long term financial plan and something you will need to work toward over a number of years.
Start saving regular amounts of your income before you spend any.
Saving enough for a deposit while renting can be tough, but is achievable with consistent and dedicated saving. The discipline gained from this experience will be invaluable when it comes to ensuring you are able to meet your home loan repayments through all following stages of life. Here are some tips to help you find ways to save money for your first home while renting.
Start saving regular amounts of your income before you spend any; save first, spend second. Open a high interest rate savings account and deposit your regular savings as soon as you are paid each week, fortnight or month. Try to increase your saving rate in small increments over a year, like 10% a month, it will make it easier to comfortably save increasingly larger amounts.
Next is to cut costs. Go to free events instead of concerts, use a bike instead of a car, cook for nutrition not glamour, learn new skills to not have to pay others to do stuff for you, and only buy second hand things for a year. Don’t worry too much about gimmicks that save you relatively small amounts on small expenses – look at eliminating or drastically reducing large expenses.
A 20% Deposit Can Actually Save You Money
Work toward saving a 20% deposit for the home you intend to buy. Without at least a 20% deposit you will have to pay for mortgage insurance, but don’t be fooled, just because you are paying for it doesn’t mean it benefits you. In fact, it is really for the banks benefit in case you default on your loan. It is a completely unnecessary and avoidable cost if you save at least 20% for your deposit.
20% of your estimated home cost is a good start, but be sure to consider the associated costs with buying a property and moving. You will need some extra cash for stamp duty, conveyancing, removals, and possibly furniture.
By making some minor lifestyle adjustments to reduce costs and allocating a regular portion of your income to savings, it is only a matter of time before you have enough for a deposit on your very own home.
Were you successful at saving a for your first home while renting? We’d love to hear how in the comments section below.