It is not easy to save for a home deposit. You will need to be patient and have the discipline to save for a house deposit.

Saving a deposit for a house can seem like climbing a mountain, due to the constant rise in living costs. Any homeowner can reach the top if they have the right tools.

Saving for a deposit can take years, but a well-thought-out strategy can allow your savings to grow at a surprisingly fast rate, cutting the time you’ll need to own your first home in half.

How much deposit do you need?

You will need a deposit based on the purchase price of the property. Lenders typically require 20% of the property’s price to be deposited. This means you will only borrow 80% of the property’s value.

Lenders Mortgage Insurance (LMI) will be charged to you if your deposit falls below 20%. This insurance protects your lender in the event of default.

Learn more What amount do you need to put down for a house deposit

14 ways you can save for a deposit

1. First, examine your spending habits

When you’ve got a big savings goal like a house deposit, it’s important to start tracking your spending so you can work out areas where you can cut back.

These days, it’s much easier to track your spending than it used to be with spending tracker apps like Pocketbook that scan through your bank account and categorise your spending. It’s likely your bank already has its own spending tracker technology which does the same thing.

It’s easy to identify where you can cut back by tracking your spending. You probably have automatic payments going out each month for subscriptions you’ve forgotten about, like a streaming service you don’t use anymore.

Once you know where your money is going, it’s easier to see how much you can put towards savings and which expenses you can cut back on so that you can save more, especially for first-time home buyers who are looking for loans.

2. Work out a budget…and stick to it

It is important to save money by doing it consistently. Although it is technically true that you should put your spare change into a jar every week, change is by definition leftovers from your purchases. This may or may not be necessary.

Determining how much you actually need to be spending every month is a must – and you should prepare to give up several things that, while enjoyable, are hindering your ability to save. It is important to budget wisely by creating a realistic savings strategy that doesn’t put you and your family at risk.

It shouldn’t take you long to create a budget. Two hours is enough. Estimate your monthly income, and expenses. Calculate your monthly expenses, such as transportation, groceries, lunches and childcare. Add any debts, such as credit cards, car loans, or other obligations, to your budget.

It’s the most difficult part: identifying and eliminating unnecessary expenses. You can afford to let go of luxuries that you don’t enjoy. Most of us don’t realise just how much money we waste on consumer goods that add no value to your life or lifestyle. Take a look at how much money you spend each month on coffee, lunches or tickets to events. Take a minute to calculate how much you spend on these things and see if you’re not shocked.

Although you don’t need to give up all your favorite things, even simple tasks like making lunch at home three days a week, avoiding the thrice-weekly chocolate bars, and reducing alcohol consumption by one drink per night will help you save approximately $2700 annually. Cut out the coffee break and a packet of cigarettes a day and you’ll save another $3500. This is a small change in your spending habits that will make a big difference.

3. Maximize savings

An oldie but a goodie, this is a tip that always works if you’re prepared to stick with it. It is important to first pay yourself before you will pay others.

You must ensure that you regularly put aside a portion your salary in savings until you reach your deposit goal. By immediately transferring a set amount as soon as your pay hits your account – say, 10% of your wage – you are more likely to stick to the savings plan. You can do this by getting your bank set up an automatic transfer. This will allow you to have more control over the money and make it difficult to access.

You might have to skip a few restaurants during the month or brown-bag your lunch if you are short on cash at the end of your pay cycle. But it will be worth the effort in the long term.

Even though it might mean more spending, it encourages you not to use your available funds to buy impulse goods.

4. Repay any existing debts

This one is not exactly a straight savings tip, but it is by default, as you’ll be saving on interest payments.

It is a smart decision to pay off your debts. This will allow you to borrow more money and will also free up cash for mortgage repayments. It is best to pay off the debts with the lowest balance and the highest interest rates first.

It definitely pays to set a budget now so you can get rid of your credit card debt and personal loans before you commit to a mortgage worth hundreds of thousands of dollars. Consolidating all of your debt into one loan at a lower interest rate is an option if you feel you are not able to pay them off. It will be easier for you to pay off your debts.

5. EEliminate luxuries

Although it’s no fun, tightening your budget a little can be an effective strategy for saving money for your first home deposit. It’s possible to start by cutting down on the luxury items in your life and then use the savings to fund a savings plan.

You don’t have to skip everything at once — instead, eliminate one luxury per month, pocket the savings, and then move on to the next thing. Over a period of twelve months, you could easily save a few thousand dollars by alternating between life’s little luxuries. You could, for example:

  • For one month, put your cable television subscription in hold
  • For a month, bring your lunch to work.
  • Don’t hit the shops for any new clothing for four weeks
  • One month without alcohol

These little things add up and will greatly increase your savings.

6. You can downgrade or move back to your home, or you can live with flatmates.

Temporarily moving into an affordable rental can save you a few hundred dollars each week, although it may be a pain and inconvenience for a short time.

Another option is, if your parents haven’t renovated your old bedroom into a spa, moving back home – or if that’s out of the question, you may consider living in a share house as these are even more affordable (if you don’t mind others around for a little while). This will allow you to significantly increase your savings rate faster.

7. Your spare time can be used to make money

You might consider seeking out additional work if your finances seem stretched. Find a way to make money while you’re at it. Whether it’s a casual babysitting job, doing freelance work on websites like Fiverr or Airtasker, selling crafty bits and bobs on Etsy or selling old clothes on eBay, there are plenty of ways you can turn your leisure hours into profitable pursuits.

8. Get first-home buyer incentives and schemes

There are many government programs and incentives that can help first-time buyers get on the property ladder quicker. Many states and territories offer help to eligible first home buyers in the form of a grant, known as the First Home Owner Grant. It’s a one-off payment which is usually paid at the time of settlement to your home lender and applied directly to your home loan. 

Other schemes include: the First Home Loan Deposit Scheme; New Home Guarantee; Family Home Guarantee; Keystart, Homestart; First Home Super Saver Scheme and Stamp Duty concessions.

9. Your $5 notes are safe

This is an easy way to accumulate cash without feeling like you’re sacrificing too much. Simply empty your wallet of $5 notes every day, or every other day, making sure you tuck them into a sealed jar or tin that you can’t access. After a few months, you can take the tin to your bank and deposit it in your high-interest savings account. You’ll be amazed at how quickly the cash piles up!

10. Your car can be downgraded

Your deposit can be repaid immediately if you sell your car. So – whether you have two vehicles or have a newer model that you are willing to swap for a car that costs less – then you can really see results here.

11. House-sitting

You don’t need to rent a place, but there are other options. You can live in and take care of a person’s house while they are away, in exchange for accommodation that is usually rent-free.

Most arrangements last for between a few days and a few weeks. Some last for years. It is usually very affordable and will be determined on an individual basis. You may also need to care for the pet or garden of the owner. Most of the time, you will only be responsible for the utility bills (electricity/gas, phone), but for more complicated arrangements, you may have to pay some long-term bills, such as water rates or council rates.

The deposit is non-refundable and must be paid when the owners return to the house. A lot of these houses belong to wealthy owners. This means that you could find yourself living in an expansive home in a quiet beachside neighborhood while still saving money.

12. Resell unused items

Whether you do it now, or when you’re about to move, it won’t make a difference – but getting rid of your unwanted belongings and furniture by the means of selling them online can put a bundle towards your deposit. This also gives you a fresh start when you move into your new home.

13. Take public transport

Your hip pocket and carbon footprint will be helped if you take public transport to work or to the bar. You might even consider selling your car to make some serious money.

14. Cash is the best method to pay for items

It may sound counterproductive to spend money when you’re trying to save, but it actually works. The idea is to pay for everything you buy using cash – not EFTPOS, not a debit VISA card, not a credit card, but cold-hard currency. It is much more painful to hand over $50 than to tap your card mindlessly.