February 03, 2020

How to start effectively saving for your first home deposit

As house prices start to bounce back, saving for a deposit is no mean feat for home buyers entering the market for the first time. As seen on Your Domain, we take a look at how first-home buyers can more efficiently save for their deposit.


Distinguish between wants and needs

Saving for a deposit is as simple as weighing up income and expenditure. While income is often controlled by an employer, expenditure is where first-home buyers have the most control and should be scrutinising.

Holidays and eating out as two big “wants” that the current generation of first-home buyers are struggling with. No longer is it a trip down to the local beach. Now it’s a trip to Europe for a two-month jaunt. These things blow big holes in savings budgets but, they are choices.


Pay off the right unsecured debts

Having a high credit limit is very dangerous, and other unsecured debts should be nipped in the bud before saving for a deposit. Personal loans, car loans, things that are ticking over in the background, that are really going to restrict your ability to put money towards your own back pocket.

But one type of debt many first-home buyers have is HECS or student loans from the government, which you can afford to leave to the side as you focus on your first-home. It will usually be be paid off as your income rises over time. 


Minimise your ongoing payments

Cancelling an unused gym membership or your Netflix account are quick fixes to accumulating extra cash in the long-run.

So if you cancelled Netflix, that might save you another $150 a year. It’s not a great saving in terms of adding to your home deposit, but if you’ve got three or four of these things, plus a gym membership you’re not using, plus car insurance you haven’t reviewed, all these things in total you can make clear savings there if you just reviewed them a bit more.

But first-home buyers often forget that rent is their biggest weekly expenditure and finding ways to cut it down will have the biggest impact on deposit saving.

Try to minimise as many ongoing payments as possible and redirect those savings to your deposit.


Stretch your savings for security

Mr Unkles says his general rule of thumb from clients is to have a 10 per cent deposit saved, plus money to cover stamp duty costs. This provides security to first-home buyers in case the market backtracks in the after buying the home, placing buyers at higher risk of a negative equity position.