Practical Tips on How to Save for a House Deposit Faster
Saving for a house deposit can feel like a daunting task especially with rising property prices and increasing living costs. However, with the right strategies, you can accelerate your savings and get onto the property ladder sooner. Here’s how to make your savings work harder and reach your homeownership goal faster.
1. Set a Clear Savings Goal
Start by determining how much you need for a deposit. In New Zealand, most banks require a 20% deposit for a standard home loan, although some lenders may accept lower deposits with additional conditions. Use online mortgage calculators to estimate the deposit amount based on your desired property price.
2. Open a Dedicated Savings Account
Keeping your house deposit separate from your everyday spending helps you stay disciplined. Look for a high-interest savings account or a term deposit that rewards you for not withdrawing funds frequently.
3. Use KiwiSaver for Your First Home
If you’re a first-time buyer you may be eligible to withdraw your KiwiSaver savings for a house deposit. You need to have contributed to KiwiSaver for at least three years, and you must leave at least $1,000 in your account. Additionally, you might qualify for the First Home Grant which provides up to $10,000 per person if you are buying a new build or up to $5,000 per person if you are buying an existing home.
4. Reduce Unnecessary Expenses
Cutting back on discretionary spending can significantly boost your savings. Consider:
Limiting dining out and takeaway meals
Cancelling unused subscriptions
Reducing impulse purchases
Shopping for deals on groceries and essentials
Even small adjustments can make a big difference over time.
5. Automate Your Savings
Set up an automatic transfer to your house deposit savings account that takes out a set amount every time you get paid. Make sure you set it up to come out straight after you get paid as this ensures you save consistently without having to think about it.
6. Increase Your Income
If possible, look for ways to increase your earnings. This could include:
Taking on extra shifts or freelance work
Selling unused items
Asking for a pay rise if you’re in a strong position at work
Starting a side business for additional income
Every extra dollar earned can bring you closer to your deposit goal.
7. Reduce Your Debt
High-interest debt can slow down your savings progress. Focus on paying off personal loans, credit cards, or other debts first. Reducing your debt not only frees up more money for savings but also improves your chances of getting mortgage approval.
8. Consider Buying with Family or Friends
Pooling resources with a trusted family member or friend can help you get into the market faster. However, ensure you have a legal agreement (drawn up by a lawyer) outlining responsibilities, repayments, and exit strategies to avoid potential conflicts.
9. Look Into Government Assistance
Beyond KiwiSaver, you may be eligible for government home ownership schemes. For example, First Home Partner is a shared-ownership scheme that helps buyers who can’t quite afford a full deposit.
10. Stay Motivated and Track Your Progress
Regularly reviewing your savings progress can keep you motivated. Consider setting smaller milestones and rewarding yourself when you reach them. Just make sure the reward doesn’t derail your savings plan!
Remember, saving for a house deposit takes time but with clear goals, smart budgeting, and the right financial strategies, you can get there faster. By making the most of available resources like KiwiSaver, budgeting wisely, and increasing your income, you’ll be well on your way to achieving homeownership sooner than you think.