Start Saving for a House Deposit

by Dev Dhingra

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Dec 2, 2021

Are you planning to buy a home but finding it difficult to save for a deposit? Saving consistently is not super easy. But with a little planning it becomes a habit as simple as brushing your teeth every day.  

And with habits, you build consistency. You will achieve the goal amount of the deposit faster.  

But first let us look at how much deposit you will need. Most banks will give you a loan of up to 80% of the cost of the house you are looking to buy. Which means you will have to pay 20% of the cost from your pockets.  

However, banks do approve loans which require less than 20% deposit. Your mortgage adviser will help you figure out how.  

Coming back to planning for the deposit, you can first estimate how much you are willing to spend on a house. This amount will indicate the approximate cost of the house.  

Again, a discussion with your mortgage adviser will help you decide a figure by assessing your current income, savings, years you can spend repaying a mortgage and many other factors. 

Once you have an idea about how much a home will cost, you can start working backwards towards saving for the deposit you would need.  

You can reach the target deposit amount when you: 

  • Set aside a fixed amount every pay day 
  • Make a few lifestyles changes  
  • Earn side income 
  • Pay back your other debt first 

Let us take a look at the each of these ideas in detail 

Set aside a fixed amount every week or month 

One of the easiest ways to build a habit of saving regularly is to put aside some of your money on each pay day. Most of us first spend on rent, food and other bills when we get our pay checks.  

We only think about saving if anything is left of the money we earned by the end of the week or the month. 

You can set a goal on how much you want to save regularly and set up a bank account just for these savings. When you get your salary or wages, just transfer the goal amount to your savings account.  

The biggest benefit of doing so is, you will have a small sum building up to a large pool over time. Better yet, you will automatically budget your expenses this way.  

If you are planning to buy a home for the first time you can put your KiwiSaver to use. Start contributing to KiwiSaver regularly and after 3 or more years you will be able to withdraw from your fund by following some simple rules for KiwiSaver HomeStart grant.  

Bonus tip: Savings accounts carry different interest rates on deposits. Your mortgage adviser can help you find the best deposit rates.  

Think Big, Start Small  

No, this advice is not just for the entrepreneur inside you. When you dream big about owning a house, you can start by spending small.  

This strategy sounds obvious because we all know how important it is to save, but you will have to make some lifestyle changes to implement it successfully. 

As we grow professionally, we start living more luxuriously. Bigger paychecks mean bigger TVs, fancy cars and the most expensive furniture.  

But with goals like buying a home, you will have to put off some of these big money items off of your list for some time. Don’t get us wrong, you deserve the best after all your hard work but after you have saved up enough for your dream home.  

You do not have to wait for extreme one-off expenditures to save, though. Think about how many times are you eating at a restaurant, buying coffee every day at your closest café or even shopping for clothes or home décor online.  

You will always be able to find a cut-off point beyond which you can stop spending for that week or month.  

As you start earning more money, you can still maintain the current comfortable lifestyle and just use the extra money to save a larger sum. 

This way you can reach your deposit goals faster and be at the liberty of spending on all your dreams later.  

You can also save more if you keep an eye on your rent. If you can manage to live somewhere cheaper but equally convenient, look into switching homes.  

Another area of big expenditure is travel. Vacations can be costly with the accommodation, transport and food expenses. You can explore locally instead! 

Consider earning side income 

If you have some time to spare on the weekend or even weekdays, you can pick up a side hustle.  

Freelancing is a very popular method of earning money on the side.  You can work for clients on a contract or need basis and get paid for every project you complete.  

Check out websites in your area where clients post requirements. You can score gigs like cooking, playing music, painting, designing, web development, data analysis and so much more.  

Some other ways to earn by a side hustle include driving for a ride sharing app, renting out your spare room as an Airbnb host, occasionally selling your stuff online or just finding something locally that you can do at least 2 days a week.  

Local work should be something you don’t travel extensively for. After all, spending money on commute to go to a job is the opposite of saving money. So, consider jobs like walking dogs, gardening, babysitting for neighbors. 

If you feel like you work better with a routine and fixed hours, it is best to look for part time work. Try to think about where do you enjoy spending your extra time. If it is at restaurants, look for waiting or cashier jobs.  

Maybe you like watching movies, look for jobs at the theatre. Or your interests may lie in merchandising and retail. You can look for sales jobs or in-store administration.  

Whatever method of side income you choose, it will definitely help with building up the deposit quicker.  

Pay back your other debt first 

Using money to pay back debt may not seem like the best idea towards saving for a deposit, but it is an important step. When you have already borrowed money for a car, education, or any personal reasons, you will have to pay higher interest rates on your mortgage.  

But even before paying higher interest rates, having the burden of other loans can set you back from saving for a mortgage deposit for a long time. 

You can take the help of your mortgage adviser in planning how you should allocate funds to pay back debt.  Getting your hands free of all other dues (including credit card payments) will leave you with just one clear goal – saving for your deposit.  

This would focus your finances in just one direction. No hassle of distributing your money among different debt items and leaving only a small fraction of your savings towards deposit money.  

Ask for professional financial advice 

Whether you are planning to buy a house or invest in properties, a mortgage adviser would be of invaluable help.  

They can help you prepare a detailed plan for a deposit by looking at your income, expenses, dues etc.  

They might be able to get you deals on interest rates which you may not find in the open market. They can also help you look for the best grants and schemes, suitable locations, your obligations while servicing a loan and much more. 

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