5 tips for saving money to buy your first home

Many people dream of one day owning a home, but the task is easier said than done. To get into the Australian property market, most people need a home loan and to do that you need an initial deposit.

Your deposit is determined by the total value of the home you’re planning to buy. Typically, a deposit should be 20% of the purchase price, but there are many lenders who may accept deposits as low as 5%.

The current national average cost of a home sits at $719,209, meaning if you are planning on putting down a 20% deposit you’ll need to save up at least $144,000. When you take into consideration stamp duty and other potential fees, you’ll need even more. Let’s face it, this amount of money makes buying a home challenging for many first time buyers.

But Rome wasn’t built in a day and nor will your deposit accumulate that quickly. So, we’ve compiled a list of five ways to save up for that deposit and with some diligence, you’ll eventually be in a position to buy your very own home.

The first step of making a budget is documenting all your expenses each month, so you get an idea of where your money goes and discover opportunities to reduce your spending. You can use our nifty budget calculator to get you started.

Once you know where your money is going you might consider cutting things out, including frequent takeaway meals or that TV or gym subscription you never use.  Once you find yourself with extra money, you could put it in a high interest rate savings account for a future home deposit.

What use is having your home deposit in a bank account if it's not earning you money? Having a savings account with a high interest rate with minimal or no fees will actually earn you some extra cash that will help you reach your deposit goal quicker. That means you could break into the market sooner.

If you have unused stuff taking up space in your home, you can sell them online to make some extra dollars. Why not try sites like eBay or Gumtree to sell the items you know in your heart you’ll never use? That exercise machine bought during lockdown and still in its box might be top of the list!

While this option might not be ideal for everyone, moving back in with your parents could help you cut back on rent and utilities. A recent Corelogic study found that the average Aussie spends about 29% of their income on rent (not including utilities). Cutting expenses in any way in the short term, could help you reach your deposit goal and be one step closer to home ownership.

Alternatively, you could move to a cheaper suburb or find a cheaper place to rent while you’re saving up money. This mild inconvenience might be worth it once you have the freedom to decorate the walls of your own home.

As a first time home buyer there are several government schemes to help you get into the property market. There is the First Home Owners Grant (FHOG) scheme which offers a one-off grant that should help towards paying off your home - should you meet the eligibility criteria. Then there is the First Home Super Saver (FHSS) which lets you save up for a deposit by using your super fund.

If you are thinking about buying a home, check out Mozo’s first time buyer guides to prepare for your buying journey. Or if you are close to saving up to your deposit goal, start checking out potential home loans down below.