SAVING FOR A HOUSE DEPOSIT

July 07, 2018




If you live in Australia then its a fair assumption that you've heard about how ridiculously steep house prices are getting, particularly in Melbourne and it's outer suburbs. I've always had a very vague goal of saving money for 'a house' but then my savings would constantly get cut down when I went on an overseas holiday or when bought my car etc. Now that I have finish my uni degree and can no longer lean on the 'I'm a student' excuse, I sat down and really crunched the numbers.

WORKING OUT HOW MUCH YOU'LL NEED

It's thrown around a lot that your house deposit is atleast that 20% of the overall house price, in order to dodge the Mortgage Insurance Protection which can mean an extra ~$5k upfront cost when buying.

Some might think this is a bit extreme but I did my research, gathering about 20 potential suburbs and wrote down the average cost of a 2 bedroom and a 3 bedroom home for each. This was actually a very interesting exercise as it was such an eye opener how much prices change suburb to suburb. Among those 20 suburbs, I found that the average 2 bedroom house would cost $573,000 and a 3 bedroom $736,000. Meaning I would need to save respectively, $114,000 or $147, 000.

SETTING A GOAL

Now I am fortunate in the sense that I have a parter who is equally as keen to look ahead our future and start saving for a house deposit. We went through crunching numbers together and actually picked a date where would like to have our house deposit saved. How you do this is simply how many weeks (in my case we did fortnights because that how often I get paid) away you would ideally like to have you house deposit.

FOR EXAMPLE: If you wanted to have $147,000 by July 2020 (102 weeks away), you can calculate how much you would need to save per week. So 147,000 divided by 102 means together you would need to save $1440 together or $720 each per week. That might seem way too unrealistic for you and your life style so then you can either extend the time of your goal or change the end goal; maybe aim for a two bedroom house instead of a three bedroom.

WORK OUT IF ITS REALISTIC

I personally found it really helpful to work out what was a realistic goal by looking and my previous savings and what I was capable of, as well as working out what percentage of my income I was contributing to my house deposit savings each pay check. Personally, for the last three months I have been able to comfortably contribute a 65% of my pay check towards my house deposit savings. I live at home with my parents and only pay a small amount of board, I'm not forking out money for bills and rent like you may be, so find a percentage that works for you - it might be 20%.

Just remember this is a short term living situation,  getting your house deposit is the toughest part and requires a lot of hustling. When I do eventually get a house, there is no way I will be putting 65% of my income towards my mortgage for the next few decades, because that is completely unrealistic. Every other financial guru seems to stick with the number 30 - as in at the most, 30% of you income should be going towards your mortgage repayments, otherwise you can't afford the property. I personally am not quite at that stage (obviously) so I don't have a weighted opinion on the matter.

FINALLY, AIM HIGH

My biggest piece of advice would be to aim high. Always round up your numbers and always go for the bigger goal. If you're saving with another person, don't just settle for 50/50, push yourself a little harder and save more than that minimum amount of 50% if possible. Don't think that you'll start saving more when you get that pay rise next year, be hard on yourself and save as much as you can and then if you do get a pay rise then treat it like a bonus and save the difference. Every dollar you save today, will be getting your more interest over the course of the time it takes you to save the whole deposit. But, more importantly, every single dollar counts and is a triumph, getting you one tip toe closer to the end result that no one can take away from you.

I am thinking I might share my journey in saving for my house deposit. I am just trying to iron out what that might look like. If I was a reader I think I would want to read actually numbers/money figures and not tip toe around income amount ect. I just need to work out the logistics and protect my partners privacy as well. SO... stay tuned.

If you have any other post ideas, please do leave them in the comments! Thank you so much for reading.

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