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Saving for your first home deposit

Saturday,  January 2016

Nick Reade, Chief Executive BankSA

Home ownership is still the great Australian dream for many people and, not surprisingly, is likely to be the biggest purchase we’ll ever make in our lives.
While buying a home is certainly exciting, saving up for a deposit isn’t as much fun and generally requires hard work, patience and discipline.

If you’re just getting started, it’s worth using a borrowing calculator (you’ll find one on the BankSA website) to establish from the outset what type of home you can afford and the deposit you’ll need, which is generally five per cent of the purchase price of the property.

Then develop a budget to provide a baseline of how much you’re currently saving or over-spending, and in turn devise a plan to help you stay on top of your living expenses in the future while putting away enough money to save for a property.

At this point you should question all of those luxury or discretionary purchases you make and consider diverting some of this money into your savings fund instead. For example, going without your $4.50 morning coffee each day would save you $31.50 every week, which over the course of a year would amount to $1,638.

You may also consider automatically diverting 10 per cent of your weekly pay into a high interest earning savings account or term deposit to help remove any temptation to spend it.

Try and pay off any personal debts such as car loans and credit cards as quickly as possible to eliminate interest payments, which could instead be going into your savings account. Balance transfer options, including consolidating multiple credit card balances into one card, are a great way to reduce your credit card debt faster.

If you’re eager to get into your own home quicker, a family pledge provides an opportunity for your parents or family to help you purchase a home without them actually providing cash for a deposit. It works by family members using their own home’s equity to provide additional security for a portion of your loan amount and is proving a popular option for first home buyers.

Saving is not easy, but all the sacrifices you make will eventually be worth it when you finally purchase a property and move into your own home.