We’re hearing a lot lately about how this is a good time for first-time buyers to get into the market. The reason behind this is that interest rates are set to come down further this year, house price growth is virtually flat, and deposit requirements are low.
The fact remains, that it is difficult for the young consumers who make up the bulk of first-time buyers to save even a 10 – 15% deposit in the current economic climate. Unfortunately, most of the first-time buyers are burdened with monthly repayments on student loans, car purchase agreements and credit and store card debt as well as employment uncertainty.
According to the latest statements from Betterbond, the average home price for first-time buyers is currently R654 000. So a 10% deposit would be R65 400, which is a large sum.
However, it is quite achievable, given determination and the right advice, for a first-time home buyer to become a home owner as soon as possible.
Herewith are top 8 ideas for saving and accumulating a home loan deposit – fast:
1. Save first, then pay the rest of your bills and living costs
Don’t tell yourself you’ll save whatever is left at the end of the month.
Save a certain amount as soon as you get paid, pay your monthly accounts next and then live off the rest. It is important to stretch it as far as you can (without creating more debt) by cutting down on all non-essential expenses.
Preferably, set up an automatic transfer so your savings go straight to a separate account immediately after your salary is deposited.
2. Review your debit orders – at least once a year
Question what you may be paying for every type of insurance, medical aid, gym membership, reward programmed and satellite TV. Keep looking to see whether you can get the same cover for less, or more points or cash bonuses for what you are paying.
Also, check what items you can eliminate altogether, at least until after you’ve bought your home.
This is an easy way to “find” money to add to your savings, although you need to be careful not to scrimp on your insurance.
3. Downgrade to cheaper transport
Vehicles are depreciating assets, which means their value declines over time.
Property, on the other hand, appreciates over time, so it is worth putting more effort into saving for a home than into hanging on to a fancy car. A car is most probably going to cost you a lot to insure, maintain and licence.
If you’re a couple with two cars, try to work out how you could live with one, try to work out how you could live with one. For you own one car, consider downgrading to a cheaper vehicle and putting whatever you save each month into your home deposit account.
4. Save on accommodation costs
If you are renting, consider a move to a home that costs less each month. Even if you only save R500 a month, you will have R6 000 more in your home deposit account by the end of the year.
Alternatively, rent out any extra space you have in your current home – a spare bedroom to a student, perhaps, or a garage to someone who needs extra storage.
5. Sell absolutely everything you no longer need or use
Just follow their safe-sale suggestions and you could raise quite a sizeable sum to put towards your deposit.
Alternatively, hold a few garage sales.
6. Create a home-based business – and a second income
People trying to save are often advised to get a second job. It is actually better to find something you can do at home to earn extra money, so you don’t waste time travelling or incur extra transport costs.
If you’re good at handicrafts you can open an online shop and sell almost anything from handmade sweaters or sandals to homemade pickles and wedding cakes.
If you’re good at fixing things, why not open a “weekend workshop” in your garage and let your neighbours bring you things to mend for a fee.
If you’re good at numbers, help other people with their tax returns.
There are hundreds of options, and if you save everything you earn from these endeavours while living on your primary income.
Your home deposit account should grow quite rapidly. When you move into your new home you can keep earning extra income, to make the burden of a home loan instalment much lighter.
7. Bulk shop for basics
There may be some luxuries you feel you can’t live without, like a certain brand of shampoo. For most basic household and food items like dishwashing liquid, toothpaste and canned tomatoes, it’s better to buy them in bulk when they are on special offer and store them for use over the rest of the year.
Work out what you’ll save and put that towards your deposit.
8. Be realistic about what you can afford
You might not be able to buy your dream home first time around. Your aim at this stage should be to get into the market as soon as you can. You can always trade up later.
Your best move is to consult a reputable mortgage originator, like Homeside Home Loans, to get pre-qualified for a home loan based on your current disposable income.
You will then have a much clearer idea of what price home to look for, and how much you really need to save for the deposit and transfer costs.
You might even find that you are closer to your goal than you think!