Many Australians find it challenging to save for a deposit to buy a home. Many wonder - "how much deposit do I need for a home loan, anyway?" The issue is important because even if you save enough to get a loan, the exact amount you have will significantly affect your home loan interest rate and the amount that you can borrow.
In general, the higher the deposit, the more likely it is that you will get a lower interest rate, however, it also depends upon the policies of each lender. Your loan-to-value (LVR) ratio is used to identify how risky you are as a borrower. To calculate the LVR on your loan, just divide the amount of the loan by the value of the property. The higher your LVR, the riskier you will be considered by the lender.
But whatever the amount of your deposit is, chances are, you will need to come up with ways to save for a home, and the faster the better. The good thing is, there are so many ways that you can save for a home deposit faster. Here are some money-saving tips:
Set a goal
As with any other project or task, having a goal to work towards is crucial. Knowing what you want to achieve will keep you motivated. Just make sure that it’s realistic.
Understand your cash flow better
Know how much comes in and what’s going out. Look at your expenses and see opportunities for saving more money. The extra dollars may not mean much now but, over time, that additional monthly cash will add up and greatly help you reach your savings goal.
Pay your credit card debt on time and in full. Paying interest charges will not help you save for your home deposit. Once you’re out of debt, you can shift your attention to accumulating money.
Look for another income
Increase the amount of money you save every month by increasing the amount of money that comes in. Leverage your hobbies, interests or skills to create additional sources of income. During your free time, you can also sell things online or offer to babysit the kids of your neighbours.
Consider doing some house-sitting
A house sitter takes care of a homeowner’s place while he or she is away. More and more Australians, especially young ones, opt for house sitting since it enables them to avoid paying rent and utility bills. It is also a great way to save for a home deposit.
Make some sacrifices
Consider moving in with your parents for a set period of time to save for your home deposit much faster. As for transportation, walk or ride a bike whenever you can. Pack lunch or prep your meals so you will not be tempted to eat out all the time.