You’ve found your way onto our website so chances are you’ve considered buying a house or your next investment. You’ve thought about what kind of place you want, where you want it and the colour of your bedspreads (hopefully it’s elephant grey?), but you can’t seem to get the deposit sorted. Saving is hard, there’s no denying it, but we’ve listed five reasons you may be sabotaging your progress.
It all starts with personalised strategy
Buying a property is a big thing, however, when talking to clients we find that there is still more work to do around their strategy or reasoning for doing so. The WHY behind the property, the timing of it and the ability for you to manage risk are all factors we discuss, which then allows us to find the appropriate balance of savings vs. loan. Is there an ideal number when it comes to a deposit? Well yes, 20%, but that number is set directly by the banks for their own comfort. Can you get a loan with only 5% of your deposit? Yes, you can do that too. The question really is, what should you have saved for your specific needs?
Not to point out the obvious but the higher your deposit and the lower you can get your interest rates, the lower your repayments are. Conversely, you and the bank are at a greater risk where there are higher repayments and interest rates. With that in mind, we focus on understanding your risk profile to absorb these higher repayments for the earlier purchases. If it’s right, then it’s worth it. If you’re rushing, you’ll be facing higher risk.
You don’t have a clear target
You’ve heard people say, ‘I’m saving for a house’ but how many of those people are REALLY saving? When there’s property involved, you know you need money but keeping it vague doesn’t keep you accountable. Here’s where a clear goal and target makes the saving that much more real. ‘A lot’ becomes a numeric amount that you can break down into small, achievable steps. You can check out our guide to goal making over here.
This amount will differ from person to person and based on what you want but can be anywhere from 5 to 20% of the total home price. We can help you work that number out. You’re likely to gasp when you hear the amount, but once we break it down it will seem possible and you can plan to make it happen.
You’ve set the bar too high
Let’s say you need a 20% deposit on your dream property that comes in at $1.2million. $240,000 is a lot of money and if it’s looking like you’ll need 10 years to get to that you may feel like the goal is just too far fetched. It’s hard to be motivated to save when the end goal seems next to impossible.
Chat to your mortgage broker and buyers advocate and consider alternatives. Where can you compromise? Can you look in a different area, downsize on the property or pick somewhere that needs a little TLC? Adjust your goals to suit your financial situation and re-establish a target that gets you excited to save.
You’re scared of the B word…
No not boot camp, the gym is a whole other problem. We mean BUDGET. This isn’t the time to stick your head in the sand. In order to save you need to understand your money in versus money out. Your budget needs to suit your circumstances, goals and lifestyle. We’re not telling you to cut the avo toast, but consider your monthly spend and how you can allocate your money to work for you and your priorities. It can be easy to go hard on the savings early and burn out. So understanding what’s achievable for you will make this part a piece of cake.
Budgeting is a yucky word, but we believe for each person there is a specific way to do it. Are you…
- The school principal looking at the big picture from above? All you do is check if the monthly savings account is going up by an okay increment to ensure you are on the right track
- The science teacher who meticulously matches every transaction through apps like pocketbook, money brilliant or myprosperity?
- The janitor (our favourite) who has multiple bank accounts, and sweeps their pay into these accounts; savings, daily spending and emergency much like the barefoot investor preaches?
It can be easy to go hard on the savings early and burn out. So understanding what’s achievable for you will make this part a piece of cake. There is no right or wrong, but knowing your spending habits and where you fit into that means there can be a tailored structure to suit you.
Money out is beating money in
This isn’t a team you want to be winning. If your expenses are too high, you’re living beyond your means and this lifestyle inflation is a major factor in many Australian’s inability to buy their dream home.
Think about the excess purchases. You may have a soft spot for designer handbags or you tend to eat out 5 of the 7 days. We’re not telling you to go cold turkey on these, but the odd sandwich for lunch here and there isn’t a big sacrifice when you consider the reward. Think about how much and when you’re spending gets out of control and come up with ways to combat that. Using your budget will make this a lot easier.
You want to move in yesterday.
We’re not joking when we say home ownership is a long game. If you want your home ASAP, you may need to compromise on your wishlist. Your first home might not necessarily be the 4 bedroom 3 bathroom spot 10 minutes from the city. You may choose to tick most of the boxes rather than all of them, to get you in quicker!
The right home for your needs requires some matchmaking we can help you out with. Check out our services here.