Did you hear the joke about the Millennial who will never afford their own home?
With property prices soaring in many cities over the past few years, there’s been plenty of chatter about whether the Gen Y and Z generations will ever be able to enter the Australian real estate market.
Despite this, the percentage of millennials purchasing homes continues to lift. So while the thought of saving for a deposit can be daunting, that’s not to say it can’t be done.
If you're living paycheck to paycheck, you may be wondering how you'll ever afford to save up the cash you need for a deposit or to service a mortgage.. But there are changes, large and small, that can have a lasting impact on your financial situation and your bank account. Before you know it, the dream of being approved for a home loan and moving into your dream home could be your reality
Dream smart
It can be challenging to stay motivated if you’re saving for an indefinite amount, so it’s critical to define your house deposit savings goal as soon as you can. Start by writing down your key figures: income, savings, spending. Then dare to dream! Within reason.
Pick out locations you like, perhaps those that are gaining popularity with first home buyers, and make a note of median house prices. There are plenty of mortgage calculators around, which will tell you how much money you will need to save to place a deposit on a property based on the purchase price. They let you play around with loan to value ratio and give you an idea of what your loan repayments will be, based on how much you pay upfront.
Defining this should give you an accurate ballpark figure, which you can then divide into a per year, month or even per week savings amount.
Look to your own backyard
To save effectively, it’s worth looking at your most significant money drain first: your current rent. Many prospective Aussie first home buyers move in with their parents or downscale their rental accommodation to save money. If these aren’t options for you, there are other ways to minimise your accommodation costs.
One option could be to get some flatmates, and another would be to move into a more affordable suburb while you save. It may not be your ideal scenario, but cutting rent and bills is one of the quickest ways to increase your savings. Short term pain equals long term gain.
The same goes for your car
Whether it’s the weekly fuel up, monthly car insurance, quarterly servicing, or yearly registration, maintaining a car in Australia isn’t cheap. If you have access to public transport, you might consider selling your car altogether, or just downgrading and cashing in on your current ride while it’s still worth something. For extra $$$, make sure you shop around for the best deal on your insurance policy and remember to revisit it each year.
Get thrifty
Let’s be real: you probably won’t save $40,000 by substituting your Barilla pasta for Coles brand. But budding first home buyers could absolutely save more by limiting eating out (or ordering in) to once a week. You can still buy quality clothes, but would you consider buying those Gucci sunglasses second hand? Facebook Marketplace, Gumtree and eBay are your friends, not only when you’re buying essentials but also selling the things you no longer need — hello, instant savings injection!
Get your money working for you
The best time to put money in your savings is the second it hits your account – or even before. Then you know what you have to play with for the month — and we’re trusting you won’t blow it!
There’s a lot to be said for out of sight, out of mind. Automatically having a percentage of your pay hit your savings account directly will likely help you resist the temptation to spend it. See if your employer can split your salary across more than one account – many will. Having an automatic savings deduction helps us manage what psychologists call loss aversion.
We don’t miss what we've never had. Remember that not all savings accounts were created equal, and a small amount of investigating into the slew of Australian banks may get you better interest rates and fewer fees.
While we’re talking income, another critical consideration should be your tax. In your quest for homeownership, check out any salary sacrifice opportunities your employer may offer, and be sure you are keeping all valid expense receipts. It will mean that when July comes around, you’re not paying tax on income you didn’t actually make.
Socialise smarter
Rule number one of socialising on a budget is not to stop altogether. Your loved ones will forgive you if you start requesting coffee and exercise dates instead of swanky nights out. It’s easy to switch an afternoon at a pub for a backyard barbecue or to have dinner and some drinks at home before you head out to a concert. You don’t have to distance yourself from your loved ones to enter the property market, but it helps to be smarter about what you do together.
Travel local
With international holidays off the table while the world gets COVID-19 under wraps, the good news is you can’t get tempted to splurge on a trip to Mykonos. But given you’ll be working so hard to hit your savings goals over a sustained period, you will still need some time away at some point. Our advice: Do not underestimate the mini-break. We live in a beautiful country, and with many incredible sights to see within driving distance, you can ditch the flights — a big money saver. That said, when borders do reopen and the international travel bug takes hold of you, Southeast Asia and New Zealand are always reasonable options.
Get professional financial advice
Not everyone understands money and finance, but there are plenty of professionals who do. Mortgage brokers serve to tell you how much you can afford to borrow, put you onto a savings plan and then assist you in becoming pre-approved. They’ll also advise you on things like guarantors, stamp duty concessions, lenders mortgage insurance (LMI), first home loan deposit schemes and first home buyers grants – confusing terminology if you’re new to the property market. To support our customers through this stage, Metricon partners with some of the best in the business, which you can find out more about via our HomeSolution page.
If you are thinking about building, Metricon offers a range of solutions, including homes designed specifically for first home buyers. For more advice, get in touch with a team member today.
