We’ve all heard the saying, “Rent money is dead money. While it can be a hard slog, how to save for a house deposit while renting is the million-dollar question on the lips of many Australians.
In a rental market that takes a good chunk of our hard-earned cash, stashing enough dosh for a home deposit might seem like a distant dream. But hold onto your hats. We’ve got some cracking tips that’ll have you on your way to owning your own piece of the great Aussie dream.
Step-by-step guide: how to save for a house deposit while renting
Understanding your financial picture
First things first, let’s rip off the bandaid and assess your current finances. What’s coming in, what’s going out, and how much is going into the old piggy bank? Get your head around your spending habits. Do you really need that gym membership, or can you just hit the pavement for a jog?
Next up, set realistic goals for your house deposit. It’s no use aiming for a harbourside mansion when you’re on a barista’s budget. Know what you can afford.
Implementing saving strategies
With your financial picture clearer than a sunny Sydney day, it’s time to create a budget and stick to it. Cut out unnecessary spending. Yes, that means no more avo toast brunches every weekend. We all know the sacrifices can be as tough as an old boot, but they’re crucial for your deposit savings.
Remember, Rome wasn’t built in a day. Neither will your house deposit. But with good savings habits and a clear plan, you’ll soon be kicking back in your own house. Keep an eye on your spending, maximise your earnings, and get to know your home loan options. Before you know it, you’ll have saved a decent chunk for your dream home while paying rent.
Prioritise saving in a high-interest savings account
Make your money work as hard as you do by popping it into a high-interest savings account. Think of it as a dedicated savings account for your house deposit. You’ve done your budget, snipped unnecessary expenses, and now you’re left with a bit of extra dosh.
Now what? Well, don’t just chuck it under your mattress and forget about it. Instead, consider opening a high-interest savings account. These little beauties work harder than a drover’s dog to grow your savings, even while you’re sleeping.
Simply put, a high-interest savings account offers a higher interest rate than your typical transaction account. This means you’ll earn more money just by keeping your funds in such an account. But remember, not all accounts are created equal, so do your homework before you decide. Look for one with the highest interest rate and lowest fees.
Optimise your earnings
Now, let’s chat about additional income streams. Ever thought of running a podcast to help you save for a deposit or starting a blog? With a little creativity, you can turn your hobbies into cash flow. When it comes to renting, consider negotiating your lease or moving to a less popular suburb. Yes, we said it. Saving money on rent can seriously boost your home deposit kitty.
Pick a side hustle
How about picking up a side hustle? Doesn’t have to be anything fancy. You’re not going to be stuck there for donkey years. So, choose something simple that won’t make you feel like a drongo after your day job. You could scrub homes, babysit, become a tutor, flog products on Etsy, or even mow lawns. There are plenty of ways to bring in a bit more dosh!
Understand home loan options
Have a yarn with a mortgage broker to learn about different home loan types. Some might offer a lower deposit, like the home loan deposit scheme. But beware of the sting in the tail—lenders’ mortgage insurance might apply if your deposit is under 20%.
Prequalify for a home loan to understand your borrowing capacity. This will also give you a clearer goalpost for your saving efforts.
Make your home energy efficient
During the winter, those energy costs can shoot up faster than a roo on a trampoline, especially in old properties. If you can, give your place a bit of a ‘rug up’ with insulation. Give your landlord or letting agent a ring if you spot any dampness in the property.
But if you’re left to your own devices, think about investing in some thick curtains and draught stoppers (which you can knock up on the cheap yourself). Don’t get sucked into the trap of never turning up the heater—just chuck it on a timer on low, so your property never turns into an icebox, but the great thing is that it isn’t chewing through your wallet either.
If you don’t live alone but still want a way to speed things up, we have a guide on how flatmates can save money to help you out.
Frequently asked questions
In your quest to buy property, you might have a few questions. Let’s cover some of the common ones:
How much should I save for a house deposit?
Well, this isn’t a one-size-fits-all answer, mate. Typically, you should aim for about 20% of the property’s value to avoid paying Lenders’ Mortgage Insurance (LMI). But don’t panic. Some lenders offer home loans with a smaller deposit. Remember, every dollar saved is a dollar closer to your home. So, start building up that separate savings account today.
How long does it take to save money for a house deposit while renting?
It depends on how much you can save money on rent and other expenses each month. If you’re saving aggressively and cutting back on all but essential expenses, you could pull it together in a few years. On the flip side, if you’re saving more conservatively while enjoying life’s little luxuries, it could take a bit longer. Consistency is key here.
Can I get a home loan without a deposit?
Honestly, it’s rare but not impossible. Some lenders offer 100% home loans, but there’s usually a catch, like needing a guarantor. For most of us, the best way forward is to save for a home deposit while renting, even if it takes a little longer. Remember, everyone’s journey to homeownership is unique. Stick to your plan and keep chipping away at your savings goal. You’ll get there.
