Cut back on spending to build your deposit

For many Australians, the first step towards buying property is securing a home loan. In order to do this, you’ll need to build up a deposit, as this will make you a more appealing prospect to lenders, while opening up a wider range of products for your home loan comparison.

The Australian Securities and Investments Commission (ASIC) recommends you save at least 20 per cent of the property’s value as a deposit. This way, you’ll avoid having to pay lenders’ mortgage insurance – which will add extra costs to your home loan – plus it will give you more borrowing power.

It’s highly likely that you’ll need to make some spending sacrifices along the way to meet your goal – which is especially true if you’re hoping to buy a home in the near future. Here are just some of the ways in which you might be able to cut back on everyday spending.

Reduce your utility bills

If you’re living in rented accommodation where you’re responsible for paying the bills, you should take a closer look at exactly how much you’re spending. Figures from the Australian Bureau of Statistics show that in 2012, households spent an average of $39 per week on energy within their home – that’s 2 per cent of their total gross weekly household income.

Simple steps such as using high energy-rated appliances and not leaving electrical items on standby can make a big difference. However, make sure everyone in your household is as serious about saving money and energy as you are, otherwise your efforts could be in vain!

Cut down on those little luxuries

Nobody likes to go through life without the odd treat now and again, but if you’re saving for a house, you need to be careful just how frequent they are. Research from ASIC shows that during an average week, Australians spend $7 on shoes, $32 on restaurant meals and $12 on their mobile phones.

Take a step back and ask yourself how much of your spending is necessary and what you could realistically cut out. The amount of money you could save might surprise you! Once you’ve started making these cutbacks, set the cash aside in a separate account and you’ll soon start to see it grow.

Set yourself a budget

This leads on to our next point – setting a budget. If you know exactly how much disposable income you have each month, it becomes that much easier to weigh up what you can put towards your house deposit.

It becomes much easier to see exactly how quickly your deposit is building.

This is also something that will come in useful once you’ve secured your home loan, as you’ll need to make sure you can make your mortgage repayments each month. Once you’ve got a savings target in place, it becomes much easier to see exactly how quickly your deposit is building, as well as giving a better indication of how soon you’ll be able to apply for a home loan.

Review your subscriptions

Let’s face it, many of us have gym memberships, magazine subscriptions and various other items we pay out for each month when in reality we rarely use them. If this is the case for you, maybe it’s time to cancel your membership and think about saving the money instead.

The Suncorp Bank Cost of Being Fit Report shows that Australians collectively spend as much as $8.5 billion each year on joining gyms and buying the latest sports equipment. This is money you could put towards your deposit, meaning you’ll be in the position to buy your home much sooner than you think.