Saving A Deposit
Saving for a home deposit is often the biggest hurdle for first-time buyers. With the right strategies and mindset, you can overcome this challenge and move closer to owning your dream home. Here are some key tips to help you save efficiently.
Set a Clear Savings Goal
Knowing how much you need to save is the first step.
The ideal deposit is typically 20% of the home’s purchase price. For instance, for a $700,000 home, you would aim for $140,000.
However, you can also explore low deposit home loans that
allow for deposits of 10% or more, though these may come with higher charges or interest rates.
Create a Realistic Budget
A detailed budget helps you track your spending and identify areas where you can cut back.
It also shows how much you can save each month. Banks view budget-conscious buyers favourably, as it demonstrates your ability to manage potential loan repayments.
Useful budgeting tools include Sorted and Pocketsmith. Set up an automatic payment to a savings account to ensure consistent savings.
Maximise Your KiwiSaver Contributions
KiwiSaver can be a crucial tool for first home buyers.
If you’ve been a member for at least three years, you might be eligible to withdraw all but $1,000 of your balance to buy your first home.
To make the most of KiwiSaver:
- Contribute at least $1,042.86 annually to receive the maximum government contribution of $521.43.
- Consider increasing your wage contributions to 8% or making additional voluntary contributions.
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Reduce Your Debts
Paying down debt is essential as it increases the amount you can borrow from banks.
High levels of debt can significantly impact your borrowing capacity.
Consolidate multiple debts to lower your overall interest costs and focus on paying off credit cards and personal loans.
Optimise Your Savings
Review the interest rates on your savings accounts.
Higher returns can accelerate your savings. Consider options like term deposits, additional contributions to KiwiSaver, or even low-risk investment funds.
Always seek advice from a registered financial adviser before making investment decisions.
Keep Your Savings Secure
Avoid the temptation to dip into your savings by setting up a separate account that isn’t easily accessible.
Some accounts offer bonus interest rates if you don’t make withdrawals, which can further boost your savings.
If you need to make a significant purchase, use cash instead of taking out a loan to avoid additional debt.
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