Trying to get into the property market in Australia is not always easy, let alone trying to save 20% to get into the market without having to pay Lenders Mortgage Insurance (LMI). Read more about LMI here.
Thankfully, with the current government incentives in place, first home buyers can enter the market with a 5 % deposit, no LMI and stamp duty concessions. Read more about the First Home Buyer Assistance schemes here.
So, how does one save for a deposit to enter the property market? In short, discipline, sacrifice, and some good luck!
10 Time For Saving For The Deposit Faster
1: Loan Support Options.
Do you have a relative or friend who may be able to assist you with the loan amount? If you are comfortable able to pay back that debt, a loan or a gift from your inner circle is often the quickest way to get into the market.
2: Joint Venture.
To minimise the initial outlay of capital on your end see if you can purchase with a partner or friend. This does come with certain downfalls, so the legal arrangements will need to be sorted ahead of time.
3: Work Out The Exact Deposit Amount.
Once you have assessed if you can gain assistance from friends and/or family or not, you will need to work out the exact amount of the property you are looking to purchase, then work out the deposit amount.
4: Do Not Waste Money.
You will need to establish what is needed vs what is wanted in your everyday life. Change your spending habits to purchase only what is needed. A helpful way to do this is to develop a budget.
5: Sell The Items You Don't Need.
Consider selling items that are no longer used, the items sitting in your garage, cupboards and shelves. Not only will this clear you're clutter but can add significant dollars towards your deposit.
6: Set Up A Forced Savings Routine.
Put a certain percentage of your wage into your savings account each payday, before you spend any money. Make this an automatic transfer to save time. Continue this practice forever.
7: Rent Out Spare Bedroom/s.
Now, this step is if your dwelling allows, consider renting out the spare bedroom. This may encroach on your privacy but paying half of your living expenses will add more to your savings than any other savings habit.
8: Consider Eating Out Less.
There are monumental savings if you stop the takeout and Uber eats. Instead, opt for cooking at home to save money. As a quick exercise, take a look at your past month of spending on eating out - did the amount surprise you?
9: Consider More Income Generating Activities.
If the amount seems too large based on your current income, look at ways you can generate more income such as a second job or starting a side hustle. This is where you turn your passion for something into a business. You may also have share investments in which pay dividends - this is classified as income that can go towards your deposit.
10: Consider Tapping Into Your Super.
If your superannuation account has sufficient funds to keep you safe under all circumstances. You could look to use your super to purchase a property if you have a Self-Managed Super Fund (SMSF) set up. Read more about purchasing an investment property with a SMSF here.
Looking to get the property investment conversation started?
Or, just looking to stay in the loop?
Warren Jacobs - National Business Development Manager at Meridian Australia
P: (02) 9939 3249
Disclaimer: When considering purchasing a property, it's always prudent to seek the advice of an appropriately qualified professional to determine which strategy is most appropriate for your circumstance.