Saving for a 20% deposit for a property can seem impossible, so how do you get a foot into the property market? Let's break it down, step by step:
Saving a deposit
The very idea of a 20% deposit for a property can seem impossible, especially when the 2020 median price for a house in central Hobart was $795,000# and Tasmanian households are spending on average $1,141* a week on general household living costs.
So, how can the average person save up a home loan deposit?
To be honest, unless you’re lucky enough to get a lotto windfall, it’s not easy. But it can be done by considering some different strategies.
So let’s look at few things you can do…
First things, first – start with a budget. Plug all your in comings and outgoings into our handy online budget planner. It’s hard to ignore your financial situation, when it’s there in black and white. If it’s not as cheery as you’d have expected, don’t panic, at least you’ll be able to see exactly where your money is going and make some hard calls about what to do to get back on track.
If the word ‘budget’ makes you want to run and hide, it might be time to start looking at things from another angle.
Why not pay yourself a set amount each time you get paid? To do this you’ll still need to figure out what you spend your money on, so you don’t leave yourself short but once you’ve done this you can set up a regular transfer of what’s ‘left over’ using your internet banking and watch your savings grow.
Start a self-imposed spending ban
It may seem rather drastic to cut out all non-essential shopping for an extended period of time but that’s what more and more people are doing. This type of ‘saving’ is not for everyone. It comes down to really wanting to do it – a bit like a diet – you need willpower and self-control. So if you’re happy to go without a new pair of jeans or restaurant dinners for a year, then go for it. Or maybe, you could just cut back on your takeaway coffee or bring your lunch to work – whichever way, making a few changes to reduce your spending can only be good for your savings.
What is rentvesting? The logic goes something like this – you rent a place where you actually want to live and buy in a more affordable suburb and then rent out that property.
In theory, because the property you buy is likely to be cheaper, the deposit you would need in this scenario would be less. Having a lower deposit, means you don’t have to spend years and years saving.
But beware. Rentvesting requires thorough research and planning. As with all big financial commitments, it’s always best to chat with an expert. They’ll help you work through some of the basics, like "can I really afford it?", and "what are the things to look for in an investment property?".
A guarantor loan can be a great option for getting a foot into the property market.
Guarantors are generally immediate family members who help to secure additional funds by using their own property’s equity to provide security for a portion of your loan amount.
The guarantee can be limited to a specified amount providing peace of mind. It also allows the guarantor’s property to be released when this specified amount has been repaid.
Want to learn more about guarantor loans? Check out our blog post 'The low down on Guarantors' here.
Are you eligible for a first home owners concession?
If you're looking to buy or build a new home, you may be eligible for the Tasmanian Government's First Home Owner Grant. The $20,000 grant has been extended to 30 June 2020 (after this the grant amount is $10,000). Check out the State Revenue Office of Tasmania's website for all the eligibility info.
The Australian Government recently launched a new scheme to help first home buyers into their own homes sooner. The First Home Loan Deposit Scheme will support eligible first home buyers by providing a guarantee that will allow those on low and middle incomes to purchase a home with a deposit of as little as 5%. You can find out more on our website.
As with any loan, there are some really important things you need to consider before going ahead with one. It can be confusing when researching all your options online, so if you get stuck, give our locally based Customer Experience team a call, we'll be super-pleased to help.
*Australian Bureau of Statistics Household Expenditure Survey 2015-2016
The small, small print: Please note this information is general in nature and does not take into account your personal circumstances or objectives. You should consider this before acting on any of the information contained.