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How to save for your own home, sweet home

Young Australians have been told time after time that they won't be able to crack the property market. With inner city prices skyrocketing in recent years and demand for popular areas constantly on the up, it's easy to see how intimidating saving for a home can be. Yet, there is hope and we're going to tell you why, but first repeat after us, "I can and will have my own home, sweet home."

Create clear goals

Before you can start deciding on what colour lounge or which cocktail glasses you're going to buy, decide on the type of property and where you want to live.

Defining the type of property you want - whether it's a house, apartment or townhouse - is important because it helps to narrow your search and dictates your budget. It's also important to consider the things you care about. An easy commute to work? Being close to friends and family? Or having a cute cafe down the end of your street? Whatever it is, make sure the area you chose to live in fits your lifestyle.


What's your number?

The amount you can reasonably spend on buying a home varies greatly from person to person. It depends on the dollar value you can save up for a deposit, but also whether you can service a mortgage.

When it comes to the amount you need for a deposit, it comes down to how much the property costs. Most lenders need at least a 20% deposit of the total property cost. For example, if the property you want to purchase costs a total of $500,000, then the deposit will be $100,000. You can estimate how much a property may cost by looking at previous sales in the area you're interested in or contacting real estate agents.

Experts say if you spend more than 30% of your income on accommodation, you are under housing stress. This same logic goes for your mortgage repayments. So, if you work your butt off to save for a deposit it doesn't mean a bank will loan you the money for your dream property if you can't afford the mortgage. So, make sure you figure out your number before you get too ahead of yourself.


The nitty-gritty of saving for a home

There are a lot of variables when it comes to saving for a deposit. Most importantly, you need to understand your cash flow, so your income and outgoing costs. To be saving you have to live within your means which entails spending less than you make and consciously making an effort to put cash away for later. Here are our top tips for doing just that!


  • Budgeting is your friend

    Budgeting isn't about restricting yourself or cutting yourself off (although you might have to sacrifice a smashed avo every now and again). Take note of your non-negotiables like rent, groceries, bills, insurance, and other necessities. Then add in the costs of "fun" things, which is the stuff you can potentially minimise or temporarily stop to free up some extra cash for saving.

    Use whatever medium works for you (Excel, Google Sheets, a whiteboard, a notebook) to construct a budget. First write down your income (weekly, fortnightly, or monthly – whichever you prefer), and then subtract all necessary spending. Then you can subtract a set amount for "fun" spending if you like (maybe a cocktail afternoon or weekend brunch once a fortnight). This means that you won't feel the strain of budgeting as much. Finally, the remaining amount is what you can put into your savings account to put towards a house deposit.

  • Ditch your debts

    If you're paying off credit cards, a car, personal loan or any other debt, it can seriously get in the way of saving for a home. To ditch your debt faster, try consolidating it. This means combining all your debts into one larger but more manageable debt. This can help you save money, as you can consolidate a debt that has a high-interest rate into one with a low-interest rate. For example, a car loan may have a higher interest rate than a personal loan, so talk to the provider of the lower-interest loan and see if they can help you consolidate your loans.

  • Don't be afraid to automate

    While your budget is keeping you on track, automation takes the guesswork out of where to put your cash each pay day. Once you know how much you can put into savings, set up automatic payments into that savings account and it'll be one less thing you have to remember to do each week, and it will ensure the savings make their way into your savings account. A savings account generally has a higher interest rate than a standard account, so your money is better off there. Log into your bank or credit union's website to organise automated transfers from your spending account to your savings account.

    Interest is essentially free money! It's calculated by adding a small percentage of the balance of the account, so if you have $1,000 and 2% interest, after the interest period you'll have $1020. Higher interest and higher initial balances mean more money gained in interest and more money for your dream house.

  • Get the most out of government grants and schemes

    There are a few ways you can squeeze some much-needed cash out of the government. A popular option is the First Homeowner Grant. This grant will help you pay for your home (up to $20,000 towards the home in some states). You could also try to take advantage of the First Home Loan Deposit Scheme, which can lower the required deposit to as small as 5% of the purchase price of the property. This can help you buy a property faster, but it's worth noting that lower deposits can mean more interest paid over the life of the home loan in the form of Lenders Mortgage Insurance (LMI).

  • Two incomes are better than one

    Have some spare time in the evenings? How about a hidden talent or hobby? Chances are you can make some extra moolah to boost your savings and reach your goal faster. A second income stream can make a big difference in a short period of time. Freelance roles are a good option, as for the most part your only responsibility will be delivering the materials you agreed to (such as an artwork or a piece of writing you created for the client). Delivery or ride-share driving is also a popular second job since all you need is a car. Remember that you don't have to hustle forever and you'll thank yourself later when you're kicking back in your own home.

Saving for a home can be tricky, but the reward is totally worth it. If you need a hand along the way - don't stress. MyPayNow is here to help you out. We believe in you and know you can and will have your very own home, sweet home.



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