If you want to Save a House Deposit (fast) there’s one thing you need to know:
Traditional methods like setting a budget, not going on holidays and eating 2-minute noodles to cut down costs don’t have the same impact that they used to.
What CAN you do to quickly save up a house deposit?
The Deposit Kickstart.
It’s a simple strategy that I used to buy my first home when I was 23.
And in today’s case study I’m going to show you the exact step-by-step process that I used.
No One Wants To Eat 2 Minute Noodles and Miss Out on All the Fun
The majority of articles out there offer you “2-minute noodle” tips.
That is, they say you need to cut your spending back as much as possible and live just on 2-minute noodles for a year… or two.
And while I agree that managing expenses are important, I think it is more important to have some balance to your life and not miss out on all the fun.
The Deposit Kickstart method isn’t going to be for everyone, but I can say it has helped me and over 113 other Hunter Galloway clients get into their first home.
So without any further ado, let’s jump right in.
How to Save for a House Deposit 💸
- Step 1: Decide a Purchase Price
- Step 2: Choose a Deposit %
- Step 3: Set a Deposit Goal
- Step 4: Calculate Stamp Duty
- Step 5: Work out your Savings Goal
- Step 6: Set a Monthly Target
- Step 7: Get Cracking
- Bonus #1: Easy tips to Cut the Time to Save a House Deposit
- Bonus #2: Tips to Reduce Your House Deposit Amount
- Bonus #3: Fast Tips to Increase your income
Step 1: Decide a Purchase Price
This may sound simple but stay with me.
If you want to buy a home, you need a deposit and for you to know how much deposit you need you to need to know what you are going to spend on that home.
In other words, deciding your purchase price is the first step in determining how much you need in savings.
Like Tony Robbins says, setting goals is the first step in turning the invisible into the visible.
It can also be a good idea to decide on a lower entry point into the market and work your way up from there.
This will allow you to have a smaller deposit to get into the market much faster.
Step 2: Choose a Deposit %
Here’s the deal:
When you buy a home you don’t need a 20% deposit…
…and you can buy a place with as little as 8-10% deposit.
Try our deposit calculator below:
Putting at least 20% deposit can improve your chances of getting approved and locking in a lower rate (and monthly payment). Some lenders and programs will accept less than 20% down, but in most instances you'll need to buy mortgage insurance
Note: The information provided by the calculator is intended to provide illustrative examples based on stated assumptions and your inputs. Calculations are meant as estimates only and it is advised that you consult with a mortgage broker about your specific circumstances.
On the other hand, if you do have 20% deposit you do avoid paying Lenders Mortgage Insurance.
(Which can add up to thousands of dollars)
In my case, I bought my first home with the minimum deposit necessary so I could get into the market faster than waiting to save up a 20% deposit.
That’s why I decided to buy a home with 8-10% deposit.
Step 3: Set a Deposit Goal
Like anything in life, having a dream is one thing but making it a reality through goal setting is key. In fact, your Deposit Goal is 10x more important than anything else.
To put it another way, you really need to set a deposit goal and work back from there.
Here’s the approach that worked best for me.
I wanted to buy a first home for $330,000 and needed to save an 8% deposit.
You would calculate this as $330,000 x 0.08 = $26,400.
On the other hand, if you wanted to buy a $550,000 house and save a 20% deposit.
You would need to calculate this as $550,000 x 0.20 = $110,000.
x % Deposit
= Deposit Goal
Read More: How I bought my first home when I was single
Step 4: Calculate Stamp Duty & Other Costs
Good news and bad news.
The good news is that if you are a first home buyer, in most states you do not need to pay Stamp Duty…
…And bad news is that you still need to pay transfer fees and other government charges.
|$||Stamp Duty + Other Fees|
If I was looking at buying a home for $330,000 I would need to factor in $872 in government fees.
For a first home buyer, I would factor in a total of 1% in other expenses.
This includes things like solicitor fees, bank fees, building and pest and other costs.
So realistically if I was buying for $330,000 I’d factor in a total of $3,300 in other fees that I would need to have for my house deposit.
Read More: 11 Hidden Costs of Buying a Home
Step 5: Work out your Savings Goal
Time to put it all together.
Add the deposit goal, to the stamp duty and other fees to determine your total saving goal!
In the case of the above, take $26,400 plus $3,300 to make a total savings goal of $29,700!
|Deposit Goal||+ Stamp Duty & Other Fees||= Total Saving Goal|
Now I have a total savings goal of $29,700 to get me into my first home!
Step 6: Set a Monthly Target
Do you know how to eat an elephant? 🐘
One bite at a time.
So how do you save for a home?
One dollar at a time.
In other words, take your total Saving Goal and set a monthly Saving Target to make it much more achievable.
Work out your saving goals by dividing it by the total months until you want to have your deposit saved.
- 🗓 12 months is 1 Year
- 🗓 24 months is 2 Years
- 🗓 36 months is 3 Years
|Saving Goal||/ Months Remaining||= Monthly Saving Goal|
If this Monthly Saving Goal seems too high, think about extending the months until you want to achieve it.
Or jump back to Step 1 and look at a cheaper property to reduce the deposit required.
Bonus Tip: Weekly Saving Target
If you prefer to set weekly savings targets just divide by the number of weeks instead of using months
- 🗓 52 weeks is 12 months, is 1 year
- 🗓 102 weeks is 24 months, are 2 years
- 🗓 156 weeks is 36 months, are 3 years
|Saving Goal||/ Weeks Remaining||= Weekly Saving Goal|
I find matching how you are paid to your savings goal works best.
So if you are paid weekly, use the weekly savings goal.
On the other hand, if you are paid monthly, use the monthly savings goal.
Step 7: Get Cracking
The best way to save is to pay yourself first.
In other words:
Put your savings aside as soon as you are paid.
This way you quarantine your Monthly Savings Goal, and then live off the rest.
Bonus: 5 Tips to Cut the Time to Save a House Deposit
- ✅ Pay Yourself First: Get your work to pay your Monthly Savings Goal directly into a special “House Deposit” bank account.
- ✅ Save on the 1%’ers: Look at shopping at Aldi or Costco to cut down on your grocery expenses, saving $5, $10 there on generic brands can save you a bunch over time.
- ✅ Cut back on your Rental Expenses: Reduce your rental expenses by moving into a smaller property, or get a flatmate to reduce your costs and save the difference.
- ✅ You gotta keep it separated: Make sure your savings and your day to day funds are completely separate and don’t get mixed up.
- ✅ Celebrate the quick wins: Once a month check in what you’ve saved to help you stay motivated. Seeing that cash bank up and get closer to your goals will keep you on track.
Bonus: Tips to Reduce Your House Deposit Amount 🏡
Short of begging, cheating or stealing there are a few other ways you can approach buying a home and getting some help from the people around you.
- ✅ Look at your brothers, sisters, relatives or friends: If you can’t get in yourself, look at partnering with friends or family. A recent survey from CBA indicates the number of mortgage applications with greater than 2 applicants has increased to 67% in 2016.
- ✅ Enquire at the Bank of Mum and Dad: Guarantor loans are on the rise, and according to figures from ANZ the number of parents guaranteeing their kids home loans has increased from 5% to 20% since 2013.
- ✅ Think about Rentvesting: Rentvesting is about living where want and investing where you can afford. If you can’t afford the dream house you want or the suburb you’ve already dreamed then continue to rent or live there and invest the difference in buying an investment property further out.
Bonus: 3 Fast Tips to Increase your income 💰
- ✅ Get a side hustle: We all know its costs lots to buy a home. If you’re finding it hard to save with your income, or don’t make enough income from your daytime job think about getting a side hustle like Uber or at a cafe. When I was saving for my first home I did some website work on the weekends to help bolster my cash savings faster.
- ✅ Make some fast money on Gumtree or eBay: Have a look around the house and sell any old computer gear, phones, or junk you have laying around. You could make a few hundred dollars quite easily!
- ✅ Downgrade to a scooter, or look at public transport: Cars are a depreciating asset and sometimes one of the biggest expenses most first home buyers have. Do an audit to see if you are really using it that much and if you can consider getting a scooter or using public transport (or uber) to get around!
Talk with an experienced broker to see what you can afford
Our team here at Hunter Galloway is here to help you buy a home in Brisbane. Nathan & Joshua Vecchio are Senior Mortgage brokers who specialise in making your home journey easy.
Unlike other mortgage brokers who are just one person operators, we have an entire team of experts to help make your home loan journey as simple as possible.
If you want to get started, please get in touch here and we can book a time that suits you – either a phone call information session or a face to face meeting (which doesn’t cost anything for you)
Further reading for Home Buyers…
- For our comprehensive guide for First Home Buyers, check out this page here.
- Looking at getting a loan, check out our Complete First Home Buyers guide.
- Saving Strategies for First Home Buyers.
- And don’t forget the costs of buying which we covered in detail here.