Owning a home is always a dream of many young couples or individuals, especially in some best to live countries such as Australia. The big mistake that many people make is trying to save up for your deposit for too long. Here is WHY:
House deposit is extremely important to start applying for the home loan and buying a home. However, if you have been trying to save this amount of money for many years, you might never have enough money to buy it.
Well, this simple calculation can help you to visualise this mistake.
- In 2016, Mary and Luke decided to start saving for a home deposit. At that time, their dream property was priced at about $800,000 and their required deposit amount was $160,000.
- The couple was able to save about $30,000 per year, so they would need about more than 5 years to have enough deposit.
- Today, 21 July 2021, they are happy to find that they have saved enough $160,000 in their bank account for the $800,000 home.
Problem: The $800,000 home in 2016 is now equivalent to $1,200,000 which requires a $240,000 deposit. Mary and Luke are upset now. The COVID-19 pandemic has somehow blown up the property price and made it impossible for Mary and Luke to buy a new home after 6 years of hard savings.
Your situation:
If you can save for a deposit amount for not more than 2 years, congratulations! Go ahead.
However, by looking into your own finances, if you think you need more time (like Mary and Luke) to save for a deposit. THINK AGAIN. Your savings rates may not be as sufficient as the property growth, then you are likely to miss your new home. Here are some possible solutions:
1. Increase your saving rate by working more hours, getting a better pay job
2. Reduce your spending by our recommended method: home budgeting, cash flow monitoring, cutting down unnecessary expenses
3. Look for a cheaper home to start with, for example the smaller home that you know you will be able to live in for a few years and it should have a potential growth should you want to sell it in a few years. Do your own research! Later, you can also have a choice to use the existing equity of this home to buy your bigger home.
4. Constantly invest your money! Do not let your money stay in your bank account until you have enough to buy your own home. Investing this amount of money will shorten your deposit saving period and reach your goal sooner.
However, investment is an area that requires sufficient knowledge and skills. Make sure you are not putting your life saving money at risk!
Contact us if you want to understand the areas that can help you to maximise your future earnings and reach your main goal sooner.
We offer coaching sessions (one on one) online during this lockdown time, our innovative and unique method of coaching will surely provide you benefits that you might not receive anywhere else.
Disclaimer: The information provided is general information only. It does not take into account your circumstances. It’s important to consider your particular circumstances before deciding what’s right for you. You should not rely solely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss by or damage to the reader or any other person.