Saving for your first home

Saving for your first home can sometimes seem as daunting as scaling Mount Everest. Lots of hard work over a long period of time with many challenges along the way. And whilst we can’t guarantee you heights of 28,000ft, the feeling of finally purchasing your own home is a pretty exhilarating experience.

Here are our tips on how to keep your house deposit savings on track.

Know what you’re aiming for

Whilst it sounds obvious it can be helpful to have the details.

For example: How much do you need? When do you want it by? How much do you need to save each pay to reach your goal. Knowing this detail can help you put a specific savings plan in place. A savings calculator can help.

How much is enough?

Generally speaking your deposit needs to equal at least 5% to 10% of the sale price of the home you are purchasing. Larger deposits may give you access to reduced home loan interest rates. Bear in mind that if you borrow more than 80% of the value of the property, you will be required to pay Lender’s Mortgage Insurance.

Factor in the extras

It’s important to factor in the extra costs involved in buying a home so you aren’t caught short. Here are some things to add to your list:

• Stamp duty – check your State government’s website for details or use a stamp duty calculator
• Legal costs
• Cost of property inspections
• Moving costs

Open a separate savings account.

Trying to save in an everyday transaction account can be tricky. You may be missing out on earning interest as most transaction accounts tend to have a lower interest rate than savings accounts. Besides that it can be super confusing trying to mentally separate what you can and can’t spend. The reality is that for most of us when it’s all there in front of you it can be tempting to spend it anyway. Look around for a savings account that pays high interest or that offers bonus interest for regular saving and use this as your ‘House Deposit’ account. Having the funds separate can remove the temptation to spend it and will also make it easy to keep track of where you’re up to.

Set up an automatic payment plan into your ‘House Deposit’ account.

One secret to changing or starting a new behaviour is to remove the decision-making element. If you have to manually transfer your savings amount to your House Deposit account every pay, you have a chance to decide not to do it this week on account of a million potential reasons – you’ve had an unexpected expense, you accidentally bought a new pair of jeans or you want to go out for dinner on the weekend.  By setting up a regular transfer, you can do this in internet banking, the money is saved before you even think about it.

Want to know more about setting up a budget and savings plan? Read here.

Calculate a budget using the IMB Bank Budget Calculator

^{Any advice in this information is general and has been prepared without taking account of your particular objectives, financial situation or needs. It is important for you to consider these matters and read any applicable terms and conditions or product disclosure statement before making a decision about our products.IMB lending criteria, terms and conditions, fees and charges apply to IMB lending products.}