First, set a goal and a date. Without a date, you will never get there. Set up a separate bank account for it. Call it ‘House Deposit Savings’ so it removes the temptation to dip into the funds. Ignore the interest rate on the account, as it will be small and will not be a big factor in achieving your goal.
Now set a realistic date, say three years from now.
- Explore whether you qualify for the ‘Welcome Home Loan Scheme’. This will reduce the required deposit from 20% to 10%.
- Search whether you can use your KiwiSaver to help. You may also qualify for a ‘Home Start’ grant. You could get up to $20,000 per couple for a first home newbuild or up to $10,000 for an existing home.
- What can you sell? You may have $5,000 worth of stuff in your house that you no longer need. Or can you buy items for $20 and resell them on Trademe for $50?
- If you get a pay increases while you save, add ALL of the increase to your savings. Work out what the mortgage payments might be and then save the difference above your current rent payment for 3 to 6 months. This will help you be better prepared when applying for a home loan. This helps you build the deposit and get used to managing the higher commitment.
- Make a commitment to not spend on anything unnecessary while you save. This will probably mean giving up some meals out, any trips and clothes that are nice but not needed. Its only for a little while remember.
- Build the savings gradually with an auto transfer. Each payday increase the amount. You won’t miss the small increase and over time it will build up.
- Go through your weekly budget and work out what you can save. Look at each line and see if savings can be made – phone, power, food, car running etc
- Can you rent cheaper elsewhere? There could be a smaller house or one in a different suburb that is $100 a week cheaper.
- Can you take in a flatmate? Check your lease agreement first, as this may be sub-letting and not all landlords agree to this. But if you can, it could make quite a dent on your rent, which could be added to your savings.
- Get rid of credit cards you don’t use and close the accounts. Reduce the limits on the ones you need and make sure you stay within the limits and pay the required amounts on time.
- Three years is 78 fortnights, which would be the number of paydays between now and then. Workout how much you need to save each payday to meet your goal. It may mean adding a year if the savings target is too high for your income.
The three years will pass quicker than you think and as your savings grow, so will your enthusiasm to reach the goal.
Contact My Money to see how we can help bring your home ownership dream, into a reality!