When you’re saving for your first home, every dollar counts. But with the right saving strategies, you can get into your own home sooner, and create some good financial habits along the way.
In most cases home loan and mortgage lenders will require that first-time buyers have a deposit that is at least 20% of the purchase price, otherwise known as the LVR or loan-to-value ratio.
Saving a 20% deposit needn’t be daunting for prospective homeowners. As a KiwiSaver member you may be far closer to loan pre-approval than you realise, as your KiwiSaver savings can be put towards the purchase! (Excluding if you were looking to purchase an investment property.)
You can also apply for the first home grant, or get help from a guarantor: someone, usually a family member, who offers their home as equity for the loan. Learn more
Whether you’re just beginning to think about your home ownership journey, or you’re nearing that magical 20% mark, there are a number of strategies that you can employ to reach your savings goals and step onto the property ladder sooner. Here are eight of the most effective house deposit saving tips.
As a first home buyer saving a deposit, you need a good understanding of your overall financial situation. This allows you to get a sense of whether you can afford to save for a deposit at all, or if you need to change some things before you even begin.
AMP’s financial fitness check is a great place to start: answer a few quick questions, and within five minutes you’ll have a clear picture of the state of your finances, and how you might work to improve them. It’s also wise to speak to a financial adviser or mortgage broker before you begin to develop your savings plan.
Now that you have a clearer picture of your financial health, it’s time to create a budget. A good rule of thumb is the 50/30/20 formula:
Obviously the 50/30/20 rule won’t work for everyone – it depends on your salary, the stage of life you’re at, and where you live. To develop a more accurate budget, use our handy budget worksheet to set a financial plan. But remember that good savers don’t just set budgets – they stick to budgets.
The simpler your budget tracking, the more inclined you'll be to stick to it. There are a number of handy apps that help you track, categorise and analyse your spending directly from your banking apps, ensuring every cent is accounted for. If you review your figures at the end of every month, you might discover you’re spending more than you really need to.
Speaking of which…
As a modern consumer you are constantly being marketed to, which makes impulse purchases hard to avoid. The slice of cake with your coffee, the shoes you just can’t walk past; all these little luxuries add up. They put a dent in your savings and often they don’t add much to your life.
The 30-day challenge is designed to curb those spontaneous purchases. When you feel that impulse buying urge, write the item you want down on a note, and put the note aside for 30 days.
If you still want it after those 30 days have passed, and if your budget permits, you’re allowed to buy it. Often that initial desire will have faded with time, and you may have saved yourself hundreds of dollars over the course of a month!
When possible – and with good budgeting, this will be possible – pay yourself first. Set up an automatic transfer for payday that sends a certain amount of money directly to your savings account. Do the same with every bill and payment you can.
This allows you to prioritise savings and the payment of necessities before everything else, and gives you a clear idea of what you can spend on yourself until the next pay comes in.
Many Kiwis are paying more than they could for things like their phone service, utilities, internet and insurance. These services are often directly debited, so you pay them without thinking, while annual price rises push the cost up and up. Eventually you might be paying well above market rate!
Check what you’re paying for these services, then compare that price to current offers. Websites like whatsmynumber.org.nz and Broadband Compare tell you whether you’re paying too much for your utilities. Service providers will often try to entice new customers with tempting deals, and it may be worth taking the leap (being wary of any fees for leaving your current contract).
Alternatively, call your current provider and negotiate a better deal – your willingness to walk away can prove handy leverage!
More money = more savings = buying a better home sooner. That might be an oversimplification, but it’s true: if you can find a way to earn more, you’ll save for a deposit faster.
Consider whether a discussion with your boss is appropriate – when was the last time you got a pay rise at work? Prepare your case, clearly stating the value you bring to the company, then arrange a meeting.
You might also consider taking extra shifts, or starting a side-hustle or a second job. While time off is critical, a bit of short term pain can quickly translate into long-term gain.
By increasing your employee contribution rate above the 3% minimum – you can choose from 4%, 6%, 8% or 10% in MyAMP – you can grow your deposit faster without even thinking about it. Over the course of years your KiwiSaver account will grow, those contributions will be invested, those investments will generate returns, and those returns will be reinvested to generate returns of their own!
You can also make other voluntary contributions, such as lump sum amounts from bonuses, inheritance, or savings you’ve built up in your bank account. When the time comes to purchase your first property you could find a surprisingly large nest egg sitting in your KiwiSaver account.
By placing your house deposit savings in KiwiSaver, you lock that money away in a safe place, where it can grow through your choice of investment (similar to managed funds), and can only be accessed when you’re ready to buy your first home.
How much money do you need to save for your first home deposit? What level of contributions, and over how much time, do you need to reach that goal? Simply fill in a few basic fields and the AMP KiwiSaver savings calculator will give you clarity on your first home savings targets, and tell you the steps you need to take in order to achieve them.
Now that you have a few strategies to help you save your deposit faster, it’s up to you to follow through – but the following AMP resources are always there to lend a helping hand.
The more you contribute now, the bigger your KiwiSaver savings will be when the time comes to buy your first home. In this guide we walk you through employee contributions, compulsory employer contributions, government contributions and voluntary contributions, and how to capitalise on each.
If you’re a member of the AMP KiwiSaver Scheme, checking your KiwiSaver balance couldn’t be simpler – the MyAMP portal gives you a clear view and total control over your KiwiSaver savings.
CHECK YOUR BALANCE
Planning for your first home deposit is the ideal time to check you’re in the right KiwiSaver funds. If you plan to buy in the next five years, for example, you might choose funds that aim to deliver modest, stable returns, as opposed to funds which could be more volatile. Our Fund Selector is designed to bring clarity to your choice of funds.
FIND THE PERFECT FUNDS
This article doesn't provide financial advice on your investment choices. Any information we provide is general only and current at the time. You should consider seeking advice when considering whether an investment is appropriate for your objectives, financial situation or needs.