Five ways to save for a deposit for your first home
Category Lifestyle
Saving up for a deposit on your first home can be difficult in today's economic climate, especially when you consider the transfer, attorney and bond fees that also have to come directly out of your pocket. That said, a sizeable deposit can make all the difference to the long-term affordability of your home and affects your home loan application in several ways
Firstly, it shows the bank you are financially responsible, which lowers your risk profile. Secondly, it reduces the size of the bond you'll need, which also decreases your risk from the bank's perspective. Thirdly, with a low risk profile you'll have a better chance of securing finance at a favourable interest rate; this, alongside a reduced loan amount, can drop the total interest you'll pay over the life of your bond by hundreds of thousands of rand.
In addition to the financial benefits, a deposit can also help strengthen your offer to purchase, as sellers and estate agents see deposits as good indications of a buyer's ability to secure a loan. Currently, a deposit can range anywhere between 9% and 16% of the property's value.
So how, exactly, does one save up an amount of such nature? Here are five ways to start the ball rolling.
Cook more, buy less
We all need to eat, but convenience foods can add up and become costly. So, instead of grabbing ready-made meals, ordering in or eating out, spend a little more time planning your (simple and easy) meals and then cooking them in your kitchen. It might take 30 to 60 minutes out of your day to do, but the savings will add up (plus it's healthier)! Another great idea to pack lunch for work instead of heading to the takeout spot around the corner from your office every day - where you can easily spend a small fortune if you add up the total costs in a month.
Cut back on credit
Credit cards and store accounts might make life easier, but they're also a great way to spend more than you really should. If you find yourself giving into temptation and shopping for more than just the bare necessities, it might be better to close your accounts until your deposit is ready to go.
Ask for an insurance re-evaluation
Your insurance premiums go up every year, but the value of many of your insured items actually goes down as they get older. If you haven't spoken to your insurance company in a while, it's a good idea to give them a call and ask for a premium re-evaluation based on present day replacement costs.
A lot of insurance companies will drop your rates significantly if you make it clear that you're unhappy with your premiums - particularly for items like cars that devalue quickly as they age. Just be careful that they don't drop your rates by increasing your excess - having a few comparative quotes on hand will help keep things in perspective.
Think twice before taking that cellphone upgrade
It's easy to be swayed by the idea of a shiny new handset when your cellphone contract expires, and to blindly sign on the dotted line for a contract that could well be more than you actually need to pay.
Luckily nowadays number portability is an option, which means you have a lot more options at contract renewal time. So shop around to find the best deals and to save money: take a close look at your usage patterns, and decide whether you really need a new phone right away, and then find the most affordable contract that suits your needs from whichever service provider has the best offer.
Cancel that wasted gym membership
If you're not actively engaged in a gym routine and have a gym membership, you're probably just throwing money for the entire month down the drain - yes, our good intentions can be costly!
Even if you gym once or twice a week, opting for the road over a treadmill can save money that can go towards your deposit. There are all kinds of fitness routines available online or apps that won't cost a cent.
Remember that saving up isn't a quick process, but it often shows us just how much money we waste on unnecessary things.
Author: Rawson Property Group