Saving for your very first home!
More recently, you may have noticed ‘for sale’ signs outside homes in your neighbourhood. This is sadly partly the result of the effects that Covid-19 has had on the South African economy and the real-estate industry.…
However, you may want to consider if it’s the right time for you to buy a home. If you are renting and you want to become a home owner, there are some questions you need to ask yourself. Like, … are you renting? Do you want to be a homeowner? Are you in a financial position to take out a bond? This blog will give you a little insight into becoming financially prepared to buy a home, and give you some tips on how to go about putting down that first deposit!
Buying and owning your first house is a huge achievement and goal for many South Africans. However, the prospect of being able to do so in your 20s or 30s may seem like a pipe dream. With the backdrop of a difficult economic landscape, lingering student debts and the ever-increasing property prices you may feel like owning your own property is just unattainable… Don’t worry—you’re certainly not alone, many South Africans of all ages are still renting properties for this very reason!
The first way to ensure that you make big steps towards purchasing your future home is to start saving for a deposit. While it’s not always required for potential buyers to have a deposit to purchase a property (in some cases it is possible to get loans covering the full price of the home), it certainly helps to offset the enormous cost of buying property. Remember, the less you borrow from the bank today, the less your monthly repayments will be in the future and the less your overall cost of the house will be in the long run. Also, it’s all about impressions.… By saving a substantial deposit, you can show banks that you're self-disciplined enough to put money away and probably have sound financial habits. This gives banks more reason to trust you and make them more likely to grant you that home loan you need. In fact, you may even have more bargaining power with the banks if you show them proof of saving up for that deposit. Depending on your specific deposit, you could potentially negotiate a lower home loan interest rate, which will of course impact your monthly repayments and the total cost of the house in the end!
Here are some of our favourite tips on how to save for a deposit on your future home:
Set yourself a goal
This may seem obvious to some, but, as with most things in life, saving for a deposit on a house is much easier when you break it up into manageable steps and when you set yourself a realistic goal. Preferably, you want to have around 10 to 12% of your dream property value banked in savings as the deposit, which will be paid upfront. With this in mind, sit down and think about how much you want to save for your deposit. Have a look at the areas you’re interested in living in and get an idea of what exactly that 10-12% deposit might be. When you have a ballpark figure of what you’re willing to spend on a home, take a hard look at your finances. Is this actually achievable?, Should I shift my focus? Then look at where you cancan you afford to cut down financially? Try to identify areas in your finances where you may be overspending, and actively devise a plan to reduce that.
If you’re really serious about making it work and buying your home, make saving for a house your number one priority. When you do this you’ll soon find it easier to cut down on things like eating out so much and splurging on new clothes every month. When you’re ever confronted with a spending urge, use the idea of your dream house as motivation. Try and weigh up what is more important to you, a clothing purchase/ meal or your future abode? Once you have decided where you can save and cut back, prepare a new budget and stick to it by making sure that you put your savings as soon as you are paid at the end of the month!
Track your spending
This is where the discipline comes in! One of the best ways to make sure that you’re keeping to your budget and not overspending frivolously, is to track your spending, yes, every day. While setting up a spreadsheet on you computer to do this is noble, it’s also largely impractical and often results in certain purchases being forgotten and falling through the cracks, or just being unmaintainable.
Rather, try and embrace the technological age we live in and opt for a budgeting programme or app. There are many savvy options that could work for you and you will find it much easier to track your money. Most apps allow you to set up a personalised budget, even provide investment options for your money and keep all your financial records in one place. This way, you have full control over your finances. Set up a, budget and you’ll be able to get a real insight into your spending habits.
Now that you’ve got a better hold on tracking your expenses – by using an app or whichever technique works for you! You can now look into everything and find corners to cut (on unnecessary expenditures of course!) One of the best ways to ensure that you can save for your deposit is to cut down on needless spending. Here are some of the ways you can try to do this:
Cut down on your current rent
For many South Africans this is one of the biggest expenses which they have to cover when that pay check comes in at the end of every month.
So, if you are not sure where to begin with cutting costs, it’s a good idea to start taking a look at what you spend on your current accommodation. What portion of your monthly income does your rent take up? If it’s anything from 30% upwards, then it’s time to look for a more affordable option. Especially when you’re young, try and find accommodation you can share with others, always opt for a smaller room or move to a less expensive area. Try avoid large renting expenses, remember you are essentially paying money towards someone else’s home loan when you should be saving for your own!
Cut down on transport expenses
This is not only going to be lighter on the pockets, but lighter on your carbon footprint! You can’t lose! Try carpooling or sharing lifts every now and then, even walking close distances or cycling! Petrol is always fluctuating and with the petrol price uncertainty in South Africa, you should look into just reducing your overall expenditure on petrol where you can! Even looking out for when prices are going up is a small win, fill up before the prices rise… this is usually a Wednesday night affair- but keep a close eye on the news.
Become a bargain hunter
There is no doubt that “every little bit adds up” over time- especially when it comes to saving money! Always try to Try and always do what you can to buy what you need at the best possible prices that you can find. Apply that ‘student’ mindset and be savvy with your spending! You can aim to plan your meals around items at the store that are on special, join free loyalty programmes to get those extra discounts and sign up for email lists that notify you of big sales, etc! Saving on the necessities means you can lower your budget and save more for the deposit on your future home- remember, keep your eyes on the prize!
Separate your savings from your current account
Out of sight, out of mind! One of the best things you can do when saving for a deposit on your future house is to create a separate savings account for it to keep it out of reach from temptation. This way, you don’t risk tapping into the money you have saved for your deposit- it’s strictly off limits. Not only that, but it will help you boost your saving efforts by earning good interest in the long run. When you’ve set your goal, open a fixed deposit account or a savings plan that yields a high interest. If you put these savings into an account from which you could draw money at any time, this fund could also double as an emergency fund if you don’t already have one, but you really should have an emergency fund before trying to save for a bond and home deposit…
Keep the focus! Eyes on the prize…
The bottom line when it comes to saving for a deposit on your future house is that it’s really not easy. It’s going to require a lot of patience, commitment and self-discipline to achieve! Don’t upgrade your phone contract, reassess your insurance policies, cook more at home and buy clothes on sale; every bit you save brings you that much closer to owning your own home, and trust us, it will be a great feeling!
It’s interesting times that we live in, and if you’re keen on owning your own property in the future, figure out just how much you are willing to sacrifice to get it. Is it important enough to prioritise it and let any other thing you may want to do take a backseat for the time being? Give it your undivided attention, and in the near future, you may just be ready to put a deposit down for your very own property. Which is something to be hugely proud of!