What No One Tells You About Saving for a House Deposit (It’s not just about cutting back on coffee!)

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Hello, and welcome back to another episode. I’m your host, Jamie, as always, and thank you so much for tuning in to another episode. This week, I’m going to chat to you about, it’s going to be kind of like a little practical episode and activity on how to save for your house deposit. Now, saving for a house deposit is sometimes a hurdle for quite a lot of people, but it can be achievable and easy once you set some realistic goals and put things in place to help you get to your deposit.

First, let’s talk about the different kinds of deposits needed. To build your first house. First off, you might’ve heard of a guarantor loan, which is a zero deposit loan. If you’re lucky enough to have your parents go guarantor for you. That means they’re using the equity in their property as your deposit.

So you essentially don’t need to put any deposit down. Therefore the 0 deposit. Now that’s a great option. If you’ve got parents who have a property, have equity and the ability to do that, that works out as such a great option. Next you have a 2 percent deposit. Now this is classed as A low deposit option.

This is normally through Keystart. To help people get their foot in the door with a low deposit option. And the trade off with that. Is having a high interest rate through Keystart due to the high interest rate at the moment, not a lot of people are actually qualifying for Keystart. So it is making it a little bit tougher to enter the market with that 2 percent deposit and that really high interest rate.

I think it’s sitting at about 8 percent at the moment, so it is quite high. The reason to that is because when interest rates go up, you’re borrowing capacity drops. So because Keystart’s interest rate is so much higher. The borrowing capacity is lower. We also have under the family guarantee scheme, 2 percent deposit option for single parents to get into the market through a bank.

Now, this here is a really, really good option. If you are a single parent, you can get in, in a low deposit option with a bank rather than through Keystart, which is the high interest rate. Then you have your standard, which is generally your minimum requirement through a bank is a 5 percent deposit. And this is because banks will lend up to 95%.

So you need to put down a 5 percent deposit. So let’s work out some examples and some rough numbers and figures. So, you know, how to break down a deposit and how to get a bit of a savings plan in place. to help you get to what you need to save. The first step I always recommend is doing a finance eligibility check.

What can you borrow? What is your package? And then how much deposit do you need? Can you go under the 2 percent single parents grant? Or are you going under 5 percent with a bank? Now, I’ll go back to a lot of people and a misconception is I need a 20 percent deposit for a house. You do not need a 20 percent deposit for a house, the minimum is 5%, but you do need a 20 percent deposit if you want to waive your lender’s mortgage insurance.

So that’s where the 20 percent comes into fact. And I know a lot of like our parents and things like that. They always tell us you need a 20 percent deposit and that that’s because then, so you don’t have lender’s mortgage insurance on your loan under the first home guarantee scheme at the moment, as a first home buyer, you can apply for that grant and you don’t pay any lender’s mortgage insurance.

So you still have a 5 percent deposit. And no lender’s a combo, as a grant together, really, really amazing because you’re saving on 25, 000, 15 to 20, 000 worth of costs. Now let’s say you need to save a 20 percent deposit. So you’ve done a finance eligibility check and you’ve got a package and you’ve got a deposit and you know where you need to go and you’ve got 10, 000 in savings.

But you need 20, 000 in savings. Now, we’re going to work out how to save 10, 000. So you might be at zero and you need to get to 10. You might have 10, you need to get to 20. Let’s work out how to save 10, 000. So as an example, you get paid 1, 000 a week. 500 goes on bills and 500 can go into savings. We can start to work out, okay, how long is that going to take us?

Here’s a little exercise that you can do to work out each either weekly, fortnightly or monthly, depending when you get paid, how to work out how much savings you can put away. So print off your bank statements, get a couple of highlighters out and highlight what is necessary and what is not necessary.

So obviously your bills, food, groceries. Things like that are necessary. Things like eating out, getting coffee, any subscriptions that you don’t use, what is not necessarily, highlight that in one color. Once you have it all marked out on necessary and not necessary, you can work out, okay, how much money per week am I spending on things that I could be saving?

So let’s say I work that out and I have 500 of Bills each week, I get paid 1, 000 and 500 of it, I can save of items and things that I don’t actually need that I’m spending money on willy nilly. Now we can kind of work out a bit of a timeline from here. How long is it going to take me to save my deposit?

I want to save 10, 000 and at the moment I’m saving 500 per week. So that is going to take me about 20 weeks to save another 10, 000 from here. Then you can start to do things like as soon as your pay comes in, transfer 500 into a savings account, high interest savings account, earn interest on that, automatically transfer that every week and make sure you stick to what you’re saying and what your goals are.

The bank wants to see genuine savings. Now, what is genuine savings? Genuine savings is savings that sits in your account for three months. This basically stops you from getting, let’s say you need a 20, 000 deposit. Oh, I’ve just been gifted 20, 000. Here’s my deposit. The bank’s going to be like, uh. We need to actually see that you can save that money, which is showing the bank that you can save money to therefore pay your repayments and your mortgage.

So that’s why it’s super important. Even if it’s just a little bit, continuously saving every week, every fortnight, every month, depending when you get paid and leaving it in there and not touching it. That’s what the bank wants to see. Even getting a bank account where you can’t withdraw from, so you can put it in there, but you can’t withdraw.

Automate your savings. into that account that you then can’t pull out. And now, of course, you have your 10, 000 First Home Owners Grant as well. And that gets lumped in with your deposit. But the bank still wants to see you making genuine savings each pay cycle. Now, your total deposit that you need might be 30, 000 minus 10, 000 First Home Owners Grant.

So your savings to contribute is about 20, 000. So that’s why you need to save. This is if we’re talking about a 5 percent deposit going with a bank, if it’s 2%, it’s obviously going to be a lot less. So this might be a really good practical activity. If you haven’t done something like this before, and you’re thinking about getting into the market, it could be in three months, six months, 12 months, start thinking ahead now and planning good habits, spending habits, saving habits of what you need to do.

Have a goal in mind, break it down, print off your bank statements and work out what you can save and what is necessary to spend on. Cut things out, set a goal, automate your savings into an account that you can’t touch. And each week, when you get paid, or monthly or fortnightly, transfer that amount. From one account into your savings account and set that goal.

All right. I’m going to save 10, 000, 500 a week, and it’s going to take me 20 weeks. And this is what I need to do to get there. Break it down, and you’ve obviously got your other deposit options as well. So really find out if you’re eligible, what you need to do and how to get there. Sometimes it’s like, oh, we’re gonna save and we’re gonna do this and we’re gonna do that, but find out actually what you are eligible for and what you need to work towards from a mortgage broker so that you are not just going blind in the dark, because sometimes that can make it.

A little bit more confusing or overwhelming and don’t stick to it because you’re like, Oh yeah, I’m going to save this much money, but then you don’t really stick to it. If you’ve done a finance check and an eligibility check, then you know, okay, mortgage broker said we were eligible for 500 K and we need to save 25, 000.

This much needs to be genuine. This is the grants that were available for, okay, let’s work it out and break it down step by step. I do have a free savings planner. Which I’ll attach in the show notes below is super helpful and this will go really well with this episode to do the activity. It’ll explain it step by step for you to print out your bank statements, how to highlight it and then how to work out what is what to then work out how much you can save and how long your timeline is going to be and how that works with building.

So I’ll attach it in the show notes below. Feel free to download it and do it with this episode when you have some time and that’ll really set you up for the best spending habits and saving habits to help you get into your house and save for your house deposit.

Thank you so much for tuning in to the home building like a boss. I hope you enjoyed today’s episode and learned something new. Remember, you’ve got this and I’ve got your back. Until next time, stay inspired, stay informed, and stay confident on your building journey. I can’t wait to chat with you on the next episode.

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