If you are thinking about purchasing your first home, then the knowledge that a 20% deposit is required can be overwhelming. That’s a lot and it takes time to save up that kind of money. It’s not all bad news, though, there are non-bank lenders like Seek Mortgages who can work with a deposit as little as 5% of the property’s purchase price. Of course, the higher your deposit, the more likely you will be successful in securing a home. However, let’s talk about how you can get your deposit saved up as quickly as possible.
First things first, you have to decide how much money you can afford to put aside each month. There are online calculators to provide you with information on repayments based on the purchase price of the property and your deposit amount. That will give you a good idea of what type of deposit you will need to get a mortgage you can afford. There’s your target deposit.
There are benefits to saving a larger deposit, from smaller monthly mortgage payments to your money-saving skills meaning you will need a smaller loan. A smaller loan means less interest to repay! It really is a win-win.
If you do save a 20% deposit, then you’ll avoid paying Lenders mortgage insurance costs. This fee is payable if you’re borrowing and having less than 20% deposit saved. Of course, a larger deposit also means you’re likely to secure a better interest rate. All in all, you save more in the long-term by saving more for your deposit now.
That covers why you should aim to save for a 20% deposit, but let’s get to the how.
Track & Budget
Do you know where every penny you spend each month goes? It’s time to start tracking it. There are plenty of apps that will help you keep track of your spending, if you use online banking and have an app, it may offer a breakdown. Start paying attention to what you spend and make a budget to tighten things up.
Settle on an appropriate percentage of your monthly income to save monthly and commit to doing so. You should have enough to pay your bills and cover daily expenses and sock the rest away. How much of your monthly income should you sock away? If possible, 20%, but you will have to decide for yourself.
Show Your Work
You should use a separate savings account so you can show lenders you have a consistent history of contributing to your savings. Ultimately, lenders want to know you manage money well and you can show that by having a separate account.
If you would like to learn more about how much deposit you need and what options you have if you’re planning on less than 20% deposit, get in touch with us to discuss how we can help.