Three tips to fast-track your first home loan deposit savings
The recent experience of living through the COVID-19 pandemic has shown Australians that there are a multitude of ways to change saving and budgeting behaviours for the better.
When saving for a deposit for a first home, modifying lifestyles and thinking outside the box can help to boost saving goals.
1. Adopt a pocket and planet mindset
Making the choice to live sustainably has dual benefits, helping your hip pocket and having a positive effect on the environment. It's also remarkably easy to take an environmentally conscious approach to saving, and the rewards can be surprising in the long run.
Just recently, Australians have been dusting off their toolboxes with two in five people undertaking DIY jobs in recent months. Gateway Bank research also shows more people are now choosing to repair broken items. By being resourceful and repairing instead of replacing, you can save hundreds of dollars all the while reducing your footprint.
Another step to a more affordable lifestyle is to reduce energy use which has been top of mind for many Australians forced to spend more time at home. Start today by switching off the lights, timing showers, and adjusting heating and cooling to within the recommended range. These quick fixes will go a long way to help reduce your use and the quarterly bills.
Longer term strategies include taking advantage of government-led schemes that reward Australian's who adopt the 'Pocket and Planet' mindset. In NSW, eligible households can apply to have the cost of light bulbs and installation subsidised, if they replace older halogen lights with new LED lights.
Energy Saver NSW estimate that the simple switch from halogen to LED on 20 downlights, could save you around $210 a year on energy costs. By fine-tuning your home, you can reduce your utility costs, redirecting savings to your deposit.
With the average Australian throwing away close to 300 kilograms of edible food each year, changes such as being more selective in the shopping aisle and clever use of leftovers can all help. It is worthwhile familiarising yourself with the difference between 'use by' and 'best before' dates to ensure you are not throwing food away prematurely and wasting money.
2. Pay-off existing debt first
While it may seem counter-intuitive to direct income away from your savings account, credit card and other outstanding debts can get out of hand quickly and be difficult to get under control.
Existing debt is likely to be accruing interest, meaning that your debt becomes more expensive the longer you leave it. Therefore, it's particularly important to tackle debt when saving for a deposit for your first home.
The less debt you have when you apply for a home loan the better and having multiple credit cards with a higher total limit can also negatively affect your credit score and capacity to borrow when you're ready to do so.
So, once you have paid down your debt, cut up your credit card and be mindful of buy-now, pay-later programs. One way to tackle debt is to focus on the debt with the highest interest rate first, while making the minimum repayments on the rest of your debts.
Getting rid of debt can be rewarding but it won't happen overnight, so it's important to take stock of your wins, stick to your budgeting and savings goals and stay motivated.
3. Harness government support
If you are a first home buyer saving for a deposit, it's worth investigating the support you can get from the government in your state or territory.
Recent Gateway Bank research found that around one in five first home buyers weren't aware of any of the government schemes on offer and given that saving for a deposit can take years, schemes can help you fast-track your dream of home ownership.
One of the most valuable schemes for deposit savers is the First Home Super Saver (FHSS) Scheme. It allows you to make contributions (tax free) of up to $15,000 per year to your super, to a maximum of $30,000.
You can then withdraw the amount when you are ready to buy your first home, allowing you to take advantage of the lower tax rate and the possibility of a higher return. Once you qualify for the scheme, you can start saving by entering into a salary sacrifice arrangement with your employer.
There are a number of other government schemes designed to support first home buyers, including the First Home Owner Grant and First Home Loan Deposit Scheme. These also help offset the costs associated with purchasing your first property.
Beyond the tips above, there are a number of other steps that savers can take to help improve their financial health, no matter the goal. Time-tested methods are worth taking into account, including setting out a clear budget and regularly reviewing costs, cutting expenses, seeking out discounts and putting a savings plan in place.