If entering the property market and escaping the cycle of renting is something you dream of doing, you’re not alone. However, saving up for a house deposit seems almost impossible for many of us.
While life is undoubtedly becoming more expensive, it is still possible to put some healthy saving habits in place to help you become a homeowner.
In this guide, we’ll take a look at how to successfully approach saving for a deposit, how much savings you may need to buy a house, no deposit alternatives and more.
Let’s get right to it.
How Much Money Do You Need To Buy A House?
Typically, lenders want you to have a minimum of 5% saved towards the value of a property before they will consider granting you a loan. Ideally, they seek to see a higher deposit amount around 20%.
This amount is directly linked to the value of the home you have in mind.
How much you will need to buy a house or how much it costs to buy a house in Perth is going to vary based on a few factors such as:
- The area you want to live in
- Whether you are buying an established home or building a new one
- The type of property such as whether it is free-standing or torrens titled
- The age and size of the property in question
- Comparable home values in the same area
In addition to this deposit as a percentage, you’ll also need to add on upfront costs such as stamp duty, solicitors fees and potentially Lenders Mortgage Insurance if you save less than 20% of the loan amount.
6 Proven Steps To Help You Save
1. Decide On A Goal Amount
Determining your goal amount is the first step you’ll need to take in this process and will influence how you approach the next steps too.
To work out this goal amount, look at house prices or house and land packages in your area and aim for 10-20% of this. Don’t forget to also add the upfront costs mentioned above to your final goal amount.
We know the amount may seem out of reach at first, but the important thing is to get started and cultivate healthy financial habits.
2. Start Tracking Your Spending
It’s amazing how quickly those little daily expenses, like a takeaway coffee add up, and how easy it is to ignore them when it comes to the bigger picture.
Taking the time to understand where your money goes and how you spend it is essential to becoming a good saver. So how do you do this? The best way to get an understanding of your spending habits is to review your transactions over the last 90 days.
A type of self-audit, this can help you pinpoint which of your expenses are essential and which you may be able to cut back on to help you reach your goal sooner.
3. Create A Realistic Budget
When creating your budget, use the details in your transaction history to outline the non-negotiable expenses such as rent, food, utilities, phone bills or similar. See what remains each week from your salary and how this fits to your savings goal.
Depending on how much you’re aiming to save and how much you have to put towards this, you may be able to shorten your goal timeline or need to extend it a little.
We also recommend allowing yourself a little for unexpected expenses and a treat once or twice a month. It’s important not to cut back on everything you love as this makes it much harder to stick to your budget long-term and you’re less likely to save anything.
You still need to enjoy life on your journey to buying a home, so don’t be too restrictive or you’ll come to resent the process.
4. Open A Savings Account With A Competitive Interest Rate
To maximise your savings, it is worthwhile researching which bank or financial institution offers the best interest rate on their savings accounts.
Typically, these types of accounts reward you with a higher interest rate for making regular minimum deposits and no withdrawals each month. This can help boost your balance over time.
5. Automate Your Savings
Setting up an automatic transfer makes paying into your savings easy and ensures it occurs every pay cycle as planned.
It also eliminates the possibility of accidentally spending on everyday purchases or splurges as it is already safely in your savings account.
6. Consider Credit Carefully
If you have had a habit of living on credit, it may be time to reconsider. Even if you routinely pay your balance at the end of each statement period to avoid interest, credit can make it easy to overspend.
Doing away with your credit card in favour of a debit card often encourages better adherence to your budget and eliminates the possibility of annual fees and interest.
If you still prefer to keep a credit card for emergencies, limit yourself to one credit card and keep as low a limit as possible.
Remember that the more credit cards you have, the more potential for debt you have which may also influence a lender’s decision when reviewing a mortgage application.
Extra Steps Worth Considering
In addition to the above, there are some other practical changes and steps you may like to incorporate or consider to help you reach your goals sooner.
Find Other Areas To Cut Back
While cutting back on bought lunches and coffees can help you save, these aren’t the only areas worth reviewing when it comes to cutting back.
To expedite your ability to save you may also like to consider:
- Moving back with family or living with a roommate (if you don’t already) as this helps share the bills and reduce your costs.
- Minimising the use of your car or whether it is necessary based on where you live. If you already use public transport more than your car, the cost of running it may not be worthwhile.
- Take time to review all insurance, utility providers and subscriptions you currently have. Compare and see if there are better-priced options and make the switch or ditch as needed.
Look Into Government Grants
When you are looking at how much it costs to buy a house, don’t forget there is some support for first-home buyers through government grants.
In Western Australia, this includes the first home owner grant (FHOG) which is a one-off payment intended to encourage and assist first-home buyers to buy or build.
This grant offers up to $10,000 to eligible first-home buyers and can be paired with discounted or waived stamp duty depending on the value of your buy or build.
The combination of these can significantly reduce your upfront costs when seeking to get onto the property ladder.
Are There Any Alternatives To Saving For A Deposit?
If saving for a deposit seems impossible, no matter how many strategies you put in place or how strictly you adhere to them, there may be an alternative.
In some instances, you may qualify to buy a home with little to no deposit. Typically, this involves a family member acting as a guarantor and using the equity on their property to back your loan.
Known as low-deposit loans or no-deposit loans, they still require you to demonstrate a good savings history and have a healthy credit score. For this reason, you should still put active efforts into saving and ensure your finances back your ability to manage a mortgage.
How Do I Know If I Qualify For A No-deposit Loan?
If you do not qualify for a low or no-deposit loan, we can help you put a plan in place to get you to where you need to be.
When you work with Stop Renting Perth, we carefully review all your options and work with you to create a roadmap to success.
Even if you’re in a tricky financial situation and have minimal savings or zero deposits, our team of experts possess the knowledge and skill needed to guide you forward.
Stop Renting Perth – Helping You Own Sooner
At Stop Renting Perth, we are committed to helping everyday Australians realise their dreams of home ownership sooner.
Offering proven strategies and solutions, our home and land packages could see you living in a brand-new home in record time, potentially without even having a deposit saved!
With over 70 home designs to choose from and the ability to source land in suburbs across Perth, you may even be able to build in your existing neighbourhood.
We’ve been where you are, stuck in the cycle of renting and are passionate about showing our clients a better way forward. Find a home that suits your needs, your lifestyle and your budget and enjoy it, brand new!
Homeownership is possible no matter your situation and potentially much sooner than you think.
Contact our no-nonsense, honest and dedicated team today at 0402 513 446 today to learn more or get started.