How to Save for Your First Home Deposit
Saving for your first home deposit can seem like a daunting task, especially given the high property prices and cost of living. However, with careful planning, disciplined saving, and taking advantage of available resources, you can achieve your goal of homeownership. Here’s a comprehensive guide on how to save for your first home deposit.
Understanding the Deposit Requirements
Before you start saving, it’s crucial to understand how much you need for a deposit. Generally, lenders require a deposit of at least 20% of the property’s purchase price. For instance, if you’re looking to buy a home worth $700,000, you would need a deposit of $140,000. However, there are options available for lower deposits, especially for first-time buyers.
Low Deposit Options
- First Home Loan: Underwritten by Kāinga Ora, this scheme allows eligible first-home buyers to purchase a home with as little as a 5% deposit. To qualify, you must meet specific income and property price criteria.
- KiwiSaver First-Home Withdrawal: If you’ve been contributing to KiwiSaver for at least three years, you can withdraw most of your savings to put towards your deposit. This can significantly boost your savings.
- First Home Grant: Eligible first-home buyers can receive up to $10,000 towards their deposit for a new home or up to $5,000 for an existing home. This grant is available to those who have been contributing to KiwiSaver for at least three years and meet the income and property price caps.
Steps to Save for Your Deposit
1. Set a Clear Savings Goal
Knowing how much you need to save is the first step. Use online calculators from banks like BNZ and Kiwibank to determine your target deposit based on your desired property price. This gives you a clear goal to work towards.
2. Create a Budget
A detailed budget helps you understand your income and expenses, allowing you to identify areas where you can cut back and save more. Websites like Sorted.org.nz offer budgeting tools that can help you track your spending and set realistic savings targets.
3. Automate Your Savings
Set up an automatic transfer from your everyday account to a dedicated savings account each payday. This ensures that you consistently save a portion of your income without having to think about it. High-interest savings accounts or term deposits can help your money grow faster.
4. Reduce Debt
Paying off high-interest debt such as credit cards and personal loans can free up more money for savings. Reducing your debt also improves your credit score, making it easier to qualify for a mortgage.
5. Increase Your Income
Look for ways to boost your income, such as taking on a part-time job, freelancing, or starting a side hustle. Any extra income can be directed towards your deposit savings.
6. Cut Unnecessary Expenses
Review your spending habits and identify areas where you can cut back. This might include dining out less, cancelling unused subscriptions, or shopping more mindfully. Small changes can add up to significant savings over time.
7. Use Windfalls Wisely
Direct any unexpected windfalls, such as tax refunds, bonuses, or gifts, straight into your savings account. These lump sums can give your savings a substantial boost.
Maximising Your Savings
1. KiwiSaver Contributions
Increasing your KiwiSaver contributions can accelerate your savings. Consider contributing more than the minimum required amount. Over time, the compounding interest and employer contributions can significantly increase your savings.
2. First Home Grant
If you’re eligible, apply for the First Home Grant. This grant can provide a substantial boost to your deposit, making it easier to reach your savings goal.
3. Term Deposits and Investments
As your savings grow, consider placing a portion in a term deposit or low-risk investment to earn higher interest. Consult with a financial advisor to explore the best options for your situation.
Staying Motivated
1. Track Your Progress
Regularly review your budget and track your savings progress. Seeing how far you’ve come can keep you motivated and focused on your goal.
2. Visualise Your Goal
Visualising your future home can be a powerful motivator. Create a vision board with pictures of your dream home and neighbourhood to remind yourself what you’re working towards.
3. Celebrate Milestones
Celebrate small milestones along the way. Reward yourself for reaching savings targets, but ensure the rewards don’t derail your progress.
Conclusion
Saving for your first home deposit requires discipline, planning, and perseverance. By setting clear goals, creating a budget, automating your savings, and taking advantage of available resources like KiwiSaver and the First Home Grant, you can make the dream of homeownership a reality. Remember, every little bit helps, and with consistent effort, you’ll be able to save enough for your first home deposit.
For more detailed guidance, consider consulting resources like Sorted.org.nz, BNZ, Kiwibank, and Kāinga Ora. These platforms offer valuable tools and advice to help you navigate the journey to homeownership. Good luck, and happy saving!