Stop dreaming and start saving – how family can help build your deposit for a home

If becoming a home owner is a dream for you, take a reality check to make it happen!  Saving for a deposit on a house can be a major project that is frequently abandoned in despair with rising house prices.

Forget the naysayers who claim that there will be a generation of young people who can never buy their own home. With some research and help from family and friends, you can aim to save a deposit to buy a place of your own.

Ask for help to achieve your dreams

If you find going it alone too daunting, don’t give up! Start with the idea that others can help and are looking for ways to assist you achieve your dreams. Do your research and calculations about how much you need and what grants and government assistance you will qualify for and let your family know that you want them to help you on the path to home ownership!

Gift Card Registry can make it happen

Start by setting up a Gift Card Registry specifically for your home deposit. Send a link to all the members of your family who want to help you save and give them the background to your savings plan. Give as much information as possible for them to feel more involved in your savings project.

First steps are to define your goals and set a timeline for milestones on the way to achieving your main objective, to accumulate a deposit so you can turn your dream into reality.

Seven steps to saving

  1. Your savings goals. Based on your current income, what is the regular amount you can save for a deposit and later to repay a mortgage?
  2. What you can borrow. Work out how much you can afford to borrow to determine how much you need to save for a deposit. Check the calculator at https://www.moneysmart.gov.au/tools-and-resources.
  3. Property prices. Take a close look at the housing market in your state and the suburb you would like to live in to get an idea of property prices. Use an example property to work out your prospective Loan to Value Ratio as this is what lenders will want to know to calculate the risk.
  4. Government grants. Find out if you are eligible for government grants such as the Commonwealth First Home Super Saver (FHSS) scheme, or the states’ First Home Owner Grant (FHOG). This can help with the amount you need to save.
  5. Concessions. Fees and charges are additional to the price of the property and vary according to the state or territory. Find out whether first home buyers in your state can get a concession for stamp duty, legal fees, loan establishment fees and lender’s mortgage insurance.
  6. There’s no way round this chore! If you are honest with yourself and your partner, a budget including all your income and expenditure will show where you can cut down and how much you can realistically save. Savings apps can help track your spending.
  7. Share your goals. Talk to your family if they are planning to help you save for a home deposit or act as guarantor on your loan. Being honest about what you need and how you are managing your finances will help get them on board with your savings plan.

Be realistic – calculate

Visit ASIC’s Money Smart website for some realistic tips on getting started. If your calculations reveal the requirement for a deposit is out of your reach, start looking at ways to get around this. Either change your ideas on what you want in a property to something more realistic or raise your expectations as to how much you need to save for a deposit! Or do both.

Check property prices in the area you want to settle in. If they are out of reach, look further afield – maybe an adjacent suburb, or a greenfield estate may be worth considering. Or look at prices in another state.

Ways to save on rent

Consider moving back into the family home to help you save on rent. Promise to help with mowing the lawn or doing some household chores to show you appreciate the free accommodation. If that isn’t an option, consider sharing a house with a group of friends to reduce rent and expenses.

Keep your budget under control

Open a savings account with interest and automate your contributions. You’ll still need an everyday transaction account, but you can earn interest on your savings. Use an online savings calculator such as https://www.moneysmart.gov.au/tools-and-resources.

First home buyer schemes and grants

Check your eligibility for both federal and state government schemes to assist first home buyers.

First Home Super Saver (FHSS)

A Federal Government initiative allows first home buyers to save for a home deposit within their super fund and benefit from the concessional tax rates. Voluntary contributions can be withdrawn to contribute to a deposit to purchase your first home. The requirements for the scheme are on the ATO website at https://www.ato.gov.au/Individuals/Super/Super-housing-measures/.

First Home Owner Grant (FHOG)

A state and territory government initiative that provides financial assistance to eligible first home buyers. The criteria for eligibility and the amount granted varies by state or territory and in WA varies according to geographical location within the state. Check the State Treasury website for the for specific details. The grant varies in each state – $26,000 (NT), $20,000 (Tas), $15,000 (Qld, SA), $10,000 (NSW, WA, VIC), $7,000 (ACT). In regional Victoria it is $20,000.

Stamp duty or transfer concessions

Each state has various concessions for stamp or transfer duty available to eligible first home buyers.  Check the details on your State Treasury website.