How To Budget For A First Home Deposit
New Year’s resolutions come in many shapes and sizes, from promises to get into shape right to taking the plunge and applying for that dream job.
One of the most common, however, is to be a little bit smarter with money, often with the goal of saving enough to pay for a deposit on a first home purchase. This can be incredibly exciting. After all, it’s not every day that you resolve to climb onto the property ladder.
Even so, financial resolutions can be hard to stick with. There are so many different things that can crop up, and if you’re not equipped with a well-thought-out plan, you may find yourself struggling to boost your savings account. Never fear, in this article the Laing+Simmons team will list a few of the top tips for making sure that your savings resolution has the biggest chance as possible of being a success.
Don’t be fooled into thinking that the flat 20 per cent is all you’ll need to pay up front.
Have a clear goal
First things first, you need to know more or less exactly how much money you need to save. You’ve probably got a rough idea of how much you can afford to spend on your first home, and with the typical deposit being 20 per cent, that’s a pretty good goal to start with. However, don’t be fooled into thinking that the flat 20 per cent is all you’ll need to pay up front.
Many first time home buyers are caught off guard by the other costs of buying a property, which can include stamp duty, mortgage insurance, legal fees and many others. Like the deposit, most of these need to be paid at the time of purchase, so be sure to include them in your savings goal so you’re not caught short. You may also need to rethink your goals at this stage. While the dream home that’s just come on the market may seem to be perfect for you, it could be worth looking at something more affordable as a first step into the market. You can always move up.
Consider your debts
Once you’ve got a clear goal in mind to save, it’s time to start thinking about any potential roadblocks that might prevent you from putting that money away. Do you have loan repayments to consider? Or perhaps a few less frequent bills that you haven’t factored into your calculations? In an ideal situation, you’d be able to eliminate all of your debts before starting to save, but obviously, some things like student loans may take a few years to completely pay off.
The key here is to be aware of what you’ll need to pay over the time that you plan on saving and incorporate this into your budget. It can be very demoralising to have a great few months of saving only to realise most of it has to go towards a car purchase repayment.
It’s budget time
Finally, you can start to prepare your budget. Whether you go through your bank statements or simply leave the credit card at home, the key is to avoid any unnecessary purchases which you might otherwise not even think twice about. Some of these – like going to the movies or out to dinner regularly – are easy to identify and cut out, but others might be less obvious.
One great way to identify any hidden expenses is to plot out your monthly income and then subtract any essential expenses (rent, food, etc). Whatever’s left over is what you should be putting away every month. If you find that the numbers don’t stack up, go back through your accounts to see where the leak is coming from, and then plug it.
By making sure to have an appropriate plan of attack before you start saving, you should be able to get that deposit together quickly and start your journey towards home ownership quicker than expected. For more information, contact Laing+Simmons today.