Saving for a house deposit is pretty hard, but saving for a house deposit in just one
year is even harder.
That's why I wanted talk today about how to save for a house in a year.
All right this is not going to be an easy task.
Let's tackle it and let me give you some ideas on how you can achieve this.
Hey I'm Ryan from On Property, your daily dose of property education and inspiration.
Every single day we come at you with a new property episode which comes out in video,
audio and in blog format at well.
If you want to get access to our free report that shows you 10 Real Positive Cash Flow
Properties in Australia, go to onproperty.com.au/free.
All right so let's get into it and talk about how to save for a house in a year.
Firstly we need to look at some considerations that you need to take into account, or some
considerations that people will take into account about you before you can go ahead
and start saving.
Firstly you need to look at your borrowing capacity.
This is the amount of money that a bank or lender is willing to lend to you in order
to buy a house.
It's all well and good that you go out and you save a deposit for a house, but if the
bank isn't going to lend you the money you need to buy it, that's completely wasted.
So what you should do before you decide on how much you want to save and before you get
right into it, go and see a mortgage broker or give the mortgage broker a call on the
phone and ask him about your borrowing capacity.
They're just going to ask you a few questions about your employment, your dependents, what
your spouse earns, all a that sort of stuff, and then their software will be able to tell
you exactly how much you can borrow.
This will be so powerful when saving your deposit, because you know once your deposits
saved, you can then go out there and you can actually purchase a property.
If you want my mortgage broker to give you a call so you can find out your borrowing
capacity, just go to onproperty.com.au/mortgage and put in your name and phone number and
he'll give you a call and sort all of that out for you.
Another consideration you need to take into account is proven savings.
Now this is something that the banks look at.
Even if you got a deposit less than 20%, sometimes even if you got that 20% deposit they want
to see that you can actually save money, because for some reason obviously, that means that
you're probably more likely to pay off a mortgage.
So if you're getting a gift from someone, maybe from your parents or something like
that, that may cause issues if you don't have proven savings.
So this is savings that you've accumulated over time.
Every bank looks at this differently.
Some of them just look at the amount of money you've held in your bank account for over
3 months and others look at consistent growth that you've seen in your savings.
You will also need to consider a Lenders Mortgage Insurance.
So if you're going to be saving a 5% deposit, well then you're probably going to need to
pay Lenders Mortgage Insurance.
In a lot of cases you can add this to the loan but in some cases you will need to pay
for it.
So you just need to consider whether you want to have Lenders Mortgage Insurance or whether
you want to save a larger deposit and go against it.
Now in every so 200, which you can go to onproperty.com.au/200, I talked in more detail about whether you
should save a big or a small deposit.
Last thing to take into account is your stamp duty and your cost.
It's all well and good to say I'm going to buy a $500,000.00 house and save a 20% deposit;
bam that's $100,000.00 easy.
Straightforward target, not an easy target to hit but it's a straightforward target;
but you also need to take into account stamp duty and your other costs as well, which can
be, I would say like a rough estimate probably 6% of the purchase price of your property,
it's a really rough estimate.
So let's say you want to buy a $200,000.00 property and you want to save a 5% deposit.
Well that means that you need to save $10,000.00, but, you'd probably really need to add another
5 to 6% on that because of your stamp duty and your other costs.
So you're looking at another $10,000.00, maybe $12,000.00, maybe $15,000.00 something like
that.
All right, so now were taking those considerations into account, how are we actually going to
go out and do this?
How are we actually going to save a deposit in one year?
Well step #1, which is, we've already really talked about it in the considerations, but
it's to find out your borrowing capacity.
So go to a mortgage broker or get my mortgage broker to call you, find out your borrowing
capacity so you know what you're working with.
So you know when you can look forward, you know when you can't look forward, and your
savings targets can be realistic.
(00:04:49 � 00:04: 50) broker to call you, it's just onproperty.com.au/mortgage and you
can fill in the little form there and he'll give you a call and sort that out for you.
You can use the online calculators but they tend not to be very accurate and just because
you used an online calculator doesn't mean you can then go to that bank and say �Look
I used this online calculator.
It said you'd lend me $500,000.00.
Let me borrow $500,000.00� and now they might say no, like it's not a binding agreement.
By finding out your borrowing capacity you can also get pre-approval which can really
help you in the future.
All right, step #2 is to then choose your purchase price and once you know what you
can borrow, then choose the purchase price of the property.
This might be depending on the area where you're going to invest in.
Maybe houses where you live are $450,000.00 to buy, maybe they're $800,000.00 to buy.
Choose your purchase price either based off the area that you're living in, or based off
whatever you know where you want to invest.
Step #3 is then to work out your savings target.
So start by looking at a percentage of the deposit that you're going to save, is it in
the mid 5%, is it in the mid 10% or is going to be 20%; and work that out from the purchase
price.
So again a $500,000.00 property and you want to save a 20% deposit, that's $100,000.00.
Then you need to add things like stamp duty and costs and stuff like that.
Now you can just go into Google and search �stamp duty calculators' if you want an
accurate representation of how much stamp duty you're going to need to pay, or you can
just add a simple amount.
Like I said around that 6% mark, you could just add that to your purchase price and how
much you need to save.
Step #4 is then break it down, break down your savings target.
Let's say you've got that $500,000.00 property, and we are saving a 20% deposit and that's
$100,000.00.
Now, I'm just going to ignore stamp duty and stuff like that just for ease of calculation
in this circumstance, but you would add it on.
So if I'm going to divide that by 12, that gives me a monthly savings target of $8,333.00.
If I divide it by 52 that gives me a weekly target of $1,923.00 and if I go and divide
it by 365 that gives me a daily target of $274.00.
Now, saving $100,000.00 in one year is going to be very unrealistic for most people, but
maybe it's that $200,000.00 house where you would have saved a 5% deposit; so you're looking
at $10,000.00 or maybe $20,000.00.
So rather than $8,000.00 a month, you need to save, it might be somewhere between you
know $800.00 and $1,500.00 that you need to save per month, which would bring your weekly
target down to somewhere around $200.00 maybe $300.00 a week, or your daily target down
to you know 30 bucks a day or 50 bucks a day or something like that�.no it'd be less,
anyway my calculation are off.
Don't take that.
But basically, what you do is you work out your savings target and you break it down
into a daily amount.
Step #5 is to then, if you find that that daily amount, or that weekly amount or that
monthly amount is too much for you to save, well you need to go ahead and lower your purchase
price.
So this might mean looking out of the area that you really want to buy in.
You might be looking at other potential investments in other areas that aren't as expensive.
Step #6 would be to repay step 3 and 4.
So you'd go back with this cheaper purchase price, work out your savings target and you
then break it down again�is this achievable for you?
It's all well and good to say you want to save $100,000.00 in a year, but if you're
only earning $60,000.00 a year, well, is that going to happen?
No, not really, unless you win the lottery or something like that.
So (00:08:52) you want to do, is you want to get a really achievable target that we
can save towards.
Step #7 is to pay yourself first, ok so when we're doing our savings target, rather than
say here's what I want to save, let me try and live my life and whatever is left over
ill save, rather than doing that, the best strategy that I have ever seen is to pay yourself
first.
So put your savings away first, and then work out a way to live off the rest which is step
# 8: learn to live off the rest or, increase your income so that you can afford to live
off the rest.
Tip #9 is to rent.
It is a fact that rent can count towards your deposit or towards your proven savings but
you're going to need to have probably at least 12 months' rent and you're going to have to
pay rent on time every time, don't miss a rent payment at all.
So because a lot of banks now with the rents, if you've got a record of paying rent over
and over, they can actually count that as your proven savings in some cases, or they
can actually count towards your deposit even though you're not giving them any money, they
see you as less risky, and therefore they might be able to waive that Lenders Mortgage
Insurance or might be able to help you out there.
So I haven't given any precise tips on how to save more money and stuff like that but
that's because I've already done a blog post on it, and again, just go into Google and
just type how to save a house deposit or tips to save a house deposit or something like
that and you'll see my article.
It comes up in the top 3 almost every time.
It's got 20 tips on how you can save your house deposit.
And ill link up to that in this episode which is, you can find at onproperty.com.au/201.
So saving a deposit is hard, it's not easy, it is a slug and it can take time.
If you can do it in a year then more power to you, but even if it takes longer than a
year, remember this is your financial future that you're working towards, it's not just,
you know, a nice thing that you want to achieve, it's going to completely transform your life.
So even if it takes you a little bit longer than a year to save it, don't give up because
it is very difficult and it is very easy to give up such a long term goal; saving a deposit
and not really seeing anything for it.
But stick with it and even if it takes you 10 and 20 years to build up that property
portfolio, it's going to change your financial life and provide you with so much more security
and so much more financial freedom if you invest correctly obviously, (00:11:31) disclaimer
I cannot guarantee that you're going to get rich or financially free.
So thank you for watching this episode.
Again, if you want access to that list of 10 Real Cash Flow Properties in Australia,
go to onproperty.com.au/fee.
Until tomorrow when the next episode comes out, remember that your long term success
is only achieved one day at a time.