Buying your first home is an exciting milestone, but it often begins with a challenge—saving for a house deposit. While it may seem daunting at first, with a clear plan and good financial habits, you can reach your goal sooner than you think (yes, even if you love avocado on toast!).
Here’s how to get started on the path to home ownership.
Step 1: Understand how much you need.
Most lenders require a deposit of at least 5-20% of the property’s purchase price. For example:
- For a $500,000 home, you’ll need a deposit of $25,000-$100,000 plus enough to cover the costs of buying a house.
Remember to account for additional costs, such as stamp duty and legal fees. If your deposit is less than 20%, you’ll also need to consider lender’s mortgage insurance (LMI).
Step 2: Set a savings goal.
Once you know how much you need, set a realistic savings goal and timeframe. For example, if you aim to save $50,000 over five years, that’s $10,000 per year—or around $833 per month.
Step 3: Create a budget.
A budget is the cornerstone of any savings plan. Use the MoneySmart budget planner to map out your income and expenses.
Need help getting started? Check out our article, Master your budget: Get ready to borrow with confidence, for practical tips on creating a budget that works for you.
And yes, cutting back on smashed avocado on toast might just make a difference. After all, as one Australian millionaire famously put it, “If you’re spending $40 a day on smashed avocado and coffees, you might struggle to buy a house.” While we’re all for treating yourself, it’s worth looking at where you can make small savings that add up over time.
Step 4: Open a high-interest savings account.
Keep your deposit funds separate from your everyday spending by opening a dedicated savings account. Look for accounts with:
- Bonus interest rates: Earn extra interest by meeting conditions like regular deposits or no withdrawals.
- No fees: Avoid account-keeping fees that can eat into your savings.
Step 5: Explore government assistance.
First-home buyers may be eligible for grants, concessions, or schemes to make buying your home more affordable. Some options include:
- First Home Owner Grant (FHOG): A one-off payment to help you buy or build your first home.
- First Home Guarantee (FHBG): Enables eligible buyers to purchase a home with as little as a 5% deposit, without paying LMI.
- First Home Super Saver Scheme (FHSSS): Save for your deposit faster by using your superannuation account to make voluntary contributions and withdraw them for your first home.
- Stamp duty concessions: Discounts or exemptions for first-home buyers in some states.
Check your eligibility and learn more through the MoneySmart website or local government portals.
Step 6: Stay motivated and track your progress.
Saving for a deposit takes time, but staying motivated can make the process easier:
- Celebrate milestones: Reward yourself when you reach smaller savings targets.
- Track your progress: Regularly review your budget and savings account to stay on track.
- Visualise your goal: Keep a photo of your dream home to remind yourself why you’re saving.
Loan Hive is here to help.
When you’re ready to take the next step, Loan Hive is here to guide you. From understanding your borrowing power to navigating the home loan process, we provide personalised advice to make your home ownership journey smooth and stress-free.