For any first home buyer, saving up enough money for the deposit is the initial, and often hardest, step along the property journey.
For young people especially, who don’t get taught how to budget properly by their parents or school, it can be difficult to even know where to begin.
But – we’re here to make you feel confident and, while this may sound crazy, excited to start budgeting.
Step 1 – Calculate how much you need to save
The first step to saving — whether it’s for a mortgage, a new car or anything — is setting a target amount.
When it comes to a deposit for a home, remember we are ideally aiming for 20% of the total cost of your home. This is so we can avoid paying lenders mortgage insurance (LMI).
Keep in mind though, you can also purchase a property with as little as 5% deposit (plus a little extra). This is because there are schemes available in the market for first home buyers, meaning you may not have to pay any lenders mortgage insurance, or if you’re not eligible for the scheme due to the price of the property, you may be able to absorb the cost of LMI in your mortgage.
But — how do we calculate the 20%? You’ll need to do some research and figure out:
- The average prices in the areas you’re looking to buy, plus fees and charges.
- Your income (whether it’s combined with a partner or just your own).
- Your current savings.
- Whether you’ll be able to tap into any additional funds, like help from parents.
A really handy tool is a savings calculator. Here you can lay out all of your expenses and income and the calculator will generate a figure on how much you need to save. Most banks will have a free savings calculator you can use online.
Step 2 – Create a budget
Laying out all of your expenses and income can help you accurately track how much you need to put away.
For a lot of people, Excel spreadsheets can feel like a mysterious dark art. But, an ordered budgeting template is the simplest and most sure-fire way to ensure you’re on course to reach your savings goal!
Guess what — it’s your lucky day. We have a budgeting template ready for you, right here:
In the template above, you’ll find fields to enter in all your outgoings. Ideally this should be based on real spending, so go through your bank statements over the last couple of months to see what you spent on things like travel, phone, groceries, eating out, insurance, your car etc.
If you can’t get real figures, a guesstimate will work too.
Step 3 – Look into government assistance
If you’re a first home buyer especially, you may be eligible for help from the government.
You may be eligible for schemes like:
First Home Owner Grant (FHOG)
If you’re eligible, the Queensland Government can put $15,000 towards the purchase of your first home if the property is valued at $750,000 or less.
First Home Super Saver Scheme (FHSSS)
This scheme lets first home buyers save for a deposit by making up to $15,000 of voluntary super contributions per year that you can later withdraw to buy your first property.
First Home Guarantee Scheme
The First Home Guarantee Scheme helps eligible first home buyers put forward a deposit as small as 5% of the purchase price, and save around $10,000-$20,000 in LMI fees.
This is just a quick snapshot of what you might be eligible for. Understandably, there are more conditions that apply to these schemes, so we recommend getting in contact with your friendly neighbourhood broker here at Arch and finding out how they work and if you’re eligible.
Step 4 – Reconsider your savings account
Not all savings accounts were created equal.
The bank you’re with at the moment may not be giving you the best deal possible. There may be savings accounts out there that can offer you a higher interest rate than what you’re getting currently.
Arch can help you find a bank that works better for you and your particular situation.
Whichever bank account you choose, make sure you set up automatic transfers from your income account. Set it up for the day you get paid, that way you can set it and forget it.
Step 5 – Remember it’s a journey
Saving up such a substantial amount of money does not happen overnight.
The important thing is to not lose sight of the end-goal while on your savings journey. There will be times where you wonder what the whole point is, but trust us — do the right thing consistently, and your savings will begin to tick over, slowly but surely.
Will you have to give up lavish nights out? Some – but not all of them.
Will you have to turn into a hermit that eats tuna and rice for every meal? No – with the right budget plan in place, you can still live your life!
Will you eventually get there with the right savings habits? YES!
It may take up to a year, it may take longer. At the end of the day, everyone’s savings journey will be different – but the end goal is always the same.
Get in contact with Arch
Once your savings journey is well on its way, get in contact with Arch Brokerage to guide you through the next steps.
The final exciting step of your journey will be enlisting the help of a broker (us – hopefully) and going from there.