Without a doubt, one of the biggest challenges people face is building a deposit for a home or investment property.
Even 4 years ago, this wasn’t necessarily the case. An example of how things have changed was that 4 years ago there were 252 suburbs across Australia that had a median house value of $1 million. As at June 2016, there are 570 suburbs which have a median house value of $1 million, according to RP Data/CoreLogic figures.
A suburb that may have had a median house price of $380,000 5 years ago may now have a median house price of $550,000. Saving for a deposit of 10% on a $300,000 – $400,000 property may be achievable, saving for a $600,000 plus property may not be as easy to achieve.
Pulling together a 10% deposit on a $600,000 home, plus combined stamp duty and associated buying costs of up to $25,000, means buyers won’t have much change from $90,000 to get into their property.
Trying to save a deposit while you’re busy paying your bills and managing debt can seem like it’s impossible to see a clear path towards actually saving some money.
Below are a few tips that could help you get stared;
- Get rid of debt
Try to focus on getting your finances in shape. This means paying off all of your consumable debts as soon as possible, this includes credit cards, personal loans and car loans.
- Adjust your shopping habits
Be aware how your credit card works, many credit cards advertise up to 55 days’ interest free however it’s important to note that the statement balance is still required to be paid each month in order to avoid interest charges and late payment fees. If you aren’t prepared to pay a 20% premium on everything you purchase, then it’s a good idea to regularly pay off your credit card in full as credit card interest rates generally range from 15-21% p.a.
- Create a savings plan
Once you have your debts and spending under control, you need to start a solid savings plan. ASIC (Australian Securities and Investments Commission) have a very useful website which can not only assist you on budget planning, but can also assist you with savings strategies and techniques to help guide you in the right direction, they also provide a savings goal calculator and a mobile app called “TrackMyGOALS” for Apple & Android products which can keep you on track anytime and anywhere.
Check out the link attached for further details – https://www.moneysmart.gov.au/managing-your-money/budgeting/simple-ways-to-save-money
4. Save your tax return and/or bonus payments
You can boost your savings account balance significantly with your tax refund each year. Whether it’s $1,000 or $10,000, it’s going to help you save towards your deposit. This also applies to bonus payments from your work, lump sum payments into your savings account not only look great but it also gets you to your goal sooner.
- Find out how much equity you have
If you already own your home and/or investment properties, make sure you get a “health check” on your home loan or investment loans every 1-2 years. You may have additional equity which can be accessed and put towards another property. In addition, there may be better loan products on the market that could save you money.
Do you already have a deposit and would like to know how much you can borrow?
Or, do you already own property and would like a financial health check?
If so, please feel free to contact the team at Seek Financial to discuss your individual financial situation further.
The above information is general in nature. It has been prepared without taking into account your objectives, financial situation or needs.