How To Save For A House Deposit
Posted January 3rd, 2008 by Mark
in
With the New Year upon us, I thought I will share my tips on how to save for a house deposit. I feel as though I have enough experience in the matter as I have been saving since 2005. As an Australian, some of these tips might be different in other countries, but it contains generic savings information which everybody can benefit from.
When I first began saving I had 2 questions:
The first is Lenders Mortgage Insurance, this is the money you pay the bank as insurance. It is usually needed if you are borrowing over 80%, and it only covers the actual bank for when you fail to repay the loan.
I decided that I did not want to pay this, and that meant I was aiming to save for a 20% loan. When I first began looking at houses, my price range was about $220,000 which could have got a house about 40kms from the city in 2005. Since then prices have been climbing, and thus I needed to save more.
Once I figured I wanted to save 20%, another goal was to save my gross yearly wage. So if I was earning $45,000 before tax, that was my savings goal. I managed to reach this goal last year, but as my deposit continues to grow, so do the house prices
Now how do you go about actually saving for that deposit?
I am going to say the terrible "B" word, yes budget. There are many ways to do it, but the best way I have been able to do this is with a program called SimpleD Budget. It is a fantastic free piece of software which I have been using for years. I must admit it takes a while to set it up the way I like it, but great news for you is I will show you how I use it.
The way I set up SimpleD is in 6 month Savings goal. In my example I aim to save $1,000 a month, and include all my expenses
On the first page I set up my 6 month savings goal where I plan to save $1000 a month.
In my included example, you will also find that I include the times when I made deposits to my savings account. I have a weekly habit of adding $50 a week, and any money I have left over I deposit straight into the account.
This shows an example of where my money is spent, this is a budget and after a while you will figure out your own spending habits. As you can change the colours, at the end of the month I change the Categories that I went under to green, and the ones I went over to red. This allows me to find out where I am going well, or where I need to cut down on spending habits.
In the expense part this is where you include ALL of your spending. An easy way I found to record spending habits is to use my mobile phone to record them. Most phones have a calendar function, so it is quick and easy to save, and update the budget once you are on the PC.
I also have 3 accounts.
I see purchasing a house as one of the biggest investments I will make in my life and not to rush into it. I learned to be frugal, and you need to find a cheap hobby. Having spent over 1000 hours creating Suburbview.com to actually look for my house, I also enjoy going to the gym. Even though this cost money, changing eating habits to be more healthy and time spent in the gym means less distractions and actually more money saved.
So in summary my tips for Saving a House deposit include:
I hope this helps you reach your savings goal, and if you are an Australian why not try Suburbview.com to find that first house.
-Mark
Suburbview.com
OldListings.com.au
When I first began saving I had 2 questions:
- Do I want to pay Lenders Mortgage Insurance (LMI)
- How much to save.
The first is Lenders Mortgage Insurance, this is the money you pay the bank as insurance. It is usually needed if you are borrowing over 80%, and it only covers the actual bank for when you fail to repay the loan.
I decided that I did not want to pay this, and that meant I was aiming to save for a 20% loan. When I first began looking at houses, my price range was about $220,000 which could have got a house about 40kms from the city in 2005. Since then prices have been climbing, and thus I needed to save more.
Once I figured I wanted to save 20%, another goal was to save my gross yearly wage. So if I was earning $45,000 before tax, that was my savings goal. I managed to reach this goal last year, but as my deposit continues to grow, so do the house prices
Now how do you go about actually saving for that deposit?
I am going to say the terrible "B" word, yes budget. There are many ways to do it, but the best way I have been able to do this is with a program called SimpleD Budget. It is a fantastic free piece of software which I have been using for years. I must admit it takes a while to set it up the way I like it, but great news for you is I will show you how I use it.
Download the following 2 files
- Download the software from the SimpleD Budget Web Site
- Download my example
The way I set up SimpleD is in 6 month Savings goal. In my example I aim to save $1,000 a month, and include all my expenses
SimpleD Budget Screen Shot 1
On the first page I set up my 6 month savings goal where I plan to save $1000 a month.
- Is my goal amount which is $1,000.00
- Is the actual amount I saved which was $1,100
- Was the amount over what I planned to save which was $100
- Is the percentage of my wage that went to savings. This figure is found in the actual month results tab.
- Is the Total Net Amount I Saved
In my included example, you will also find that I include the times when I made deposits to my savings account. I have a weekly habit of adding $50 a week, and any money I have left over I deposit straight into the account.
SimpleD Budget Screen Shot 2
This shows an example of where my money is spent, this is a budget and after a while you will figure out your own spending habits. As you can change the colours, at the end of the month I change the Categories that I went under to green, and the ones I went over to red. This allows me to find out where I am going well, or where I need to cut down on spending habits.
SimpleD Budget Screen Shot 3
In the expense part this is where you include ALL of your spending. An easy way I found to record spending habits is to use my mobile phone to record them. Most phones have a calendar function, so it is quick and easy to save, and update the budget once you are on the PC.
I also have 3 accounts.
- 1st Account is for Every Day Banking.
- 2nd Account for “Rainy day” purchases. I transfer $50 each week into this account and use it to pay for big spending items like Car Insurance, internet access, and anything else that comes a couple times a year.
- 3rd Account is the Actual Home Deposit Account. I use ING Direct. There are plenty of other Internet based accounts where you don’t need to pay fees and offer a great interest rate.
I see purchasing a house as one of the biggest investments I will make in my life and not to rush into it. I learned to be frugal, and you need to find a cheap hobby. Having spent over 1000 hours creating Suburbview.com to actually look for my house, I also enjoy going to the gym. Even though this cost money, changing eating habits to be more healthy and time spent in the gym means less distractions and actually more money saved.
So in summary my tips for Saving a House deposit include:
- Download the software from the SimpleD Budget Web Site
- Download my SimpleD example
- Keep to 6 month saving goals
- Don’t spend any wage increases and bank the difference you are making.
- Have 3 Bank accounts. (Every day banking, Rainy day purchases, Home Deposit) It’s not hard to find ones with no fees.
- Use a Mobile Phone Calendar function to track spending habits if you don’t have a receipt
- Try to update the budget spending every day, as putting a weeks worth is too time consuming, and you forget spending.
- Don’t spend coins. Put these in a piggy bank and bank them once your budget is over. You will be surprised how much you have if you never use them.
I hope this helps you reach your savings goal, and if you are an Australian why not try Suburbview.com to find that first house.
-Mark
Suburbview.com
OldListings.com.au