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Top tips to save for a home deposit

The below is intended for general informational purposes only and is not to be considered financial advice.

With Australian wages stagnant and the cost of living continuing to rise, it’s seemingly more difficult to save up for a home deposit than ever before. Once you’ve paid the rent, sorted out the bills and done the weekly shopping, retaining even a small part of your paycheck can seem like an insurmountable task. The price of electricity alone is more than likely to burn a hole in your wallet. Putting enough funds away to pay for your next holiday or new car is hard enough, so you’re going to need a more thoughtful approach to secure a home deposit on your dream abode.

The reality is there’s no easy fix to your saving woes. Putting money aside requires discipline. But, by adopting some savvy saving strategies and making some smart financial decisions you could find yourself closer to home ownership than you might think. With property in Western Australia the cheapest it has been in years, now is a good time to start putting a few extra pennies away towards a deposit before prices start to rise again.

Keep these simple tips in mind when you’re ready to break free from the rental cycle and reach your goal of home ownership.

Understand your finances

Before you set out on your savings campaign, it’s important to figure out how much money you can afford to borrow. Get a good idea of the state of your finances before making big decisions on where you plan to buy or build.

While we would all love to live in the flashiest suburbs, you’re probably not going to be able to afford to build your first home there – so be realistic about your price range. Could you build on a narrower lot that’s more affordable or in a suburb where land is cheaper?

Set out a budget

Once you have sorted out where you can afford to build, work out a savings plan and stick to it. Determine how much you need to be spending every month and find areas of the budget where you can cut a few expenses. Most of us probably don’t realise how much money we spend on lunches, dinners and nights out on the town. It doesn’t mean you have to give up smashed avo, but if you’re buying takeaway every night, it may be prudent to cut that habit to once a week.

The bottom line is the small things do add up. If you buy one takeaway cup of coffee every day of the year, that’s over $1500 spent already. Develop some smart habits and set a date for when you plan to hit your savings target.

Bonus tip: Look into your insurances policies to see if there might be cheaper plans out there.

Take advantage of the First Home Owner Grant

If you’ve never bought a home and are planning to build new, chances are you will be eligible for the First Home Owner Grant – which contributes a very helpful $10,000.
The requirements are fairly simple:
• It only applies to new home builds.
• You cannot have received the grant before and it can only be used for your first purchase.
• You must be at least 16 years old and an Australian citizen.
• You must occupy the home as your principal residence for six months within 12 months of settlement or construction.

Manage your debts

After the Banking Royal Commission, the big lenders are scrutinising people’s accounts more cautiously than ever. It will pay to settle your debts and show the banks you have a clear set of finances. Lenders will not lend you funds if they can’t prove you are responsible when it comes to money. Stockpiling cash is also far more difficult while the interest on your credit card is making dents in your hard-earned savings. There’s no point paying debt back slowly because you’ll only lose more money in the longer term.
Bonus tip: If you have multiple debts, consider consolidating them into one and pay it off that way.

Practical strategies

• It might sound pretty obvious, but start saving as early as you can. If you know you want to build a new home, don’t wait till the new year, just get the ball rolling.
• Set up a savings bank account that you can’t access easily. You can even have your salary paid straight into that savings account.
• Try and save at least 20 per cent of the purchase price so you can avoid paying lender’s mortgage insurance.
• Consider moving back into your parents’ place to save on the rent.
• Pick up a casual job on top of your current work.

While it’s never easy to curb your spending in the modern age of Netflix, thousands of Australians still manage to save enough for a home deposit every year, so why can’t you?

One extra piece of advice is to always account for the additional costs that come with building your new home. Talk to the experts and find out how inspection fees, conveyance fees, loan application fees and stamp duty costs might affect you.

Best of luck with your savings journey.

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