Tips to get to your 20% deposit quicker

23 February 2018

When you’ve set a goal of buying your first home, every dollar counts. Saving for a house can also be just the nudge you need to understand your own finances more!

In many cases, mortgage lenders will ask you for a 20% deposit. This might seem a lot but it’s worth remembering that the more money you can put into a deposit, the lower the amount you’ll have to borrow. That means you could pay less interest overall and pay your mortgage off faster!

The idea of getting to that 20% may seem daunting but it doesn’t need to be. If you’re in KiwiSaver you might have already saved more than you realise. Whether you are close to reaching your 20% or you’re stuck on 0%, there are a number of things you can do to reach your savings goals and get into your first home.

Understanding your finances  

Having a good understanding of your overall financial situation is particularly helpful for first home buyers. A good place to start is our five-minute financial fitness check. This handy fitness check will give you an idea about what state your finances are in and some useful tips about what to do next.

Tell your money what to do

Now you have a better idea of your overall financial state, it’s time to make (and stick to) a budget. We have a handy budget worksheet you can use, or there are a number of apps available that will help you record a budget and track how you’re spending against it.

Find out where it’s really going

There are a number of handy apps available (PocketSmith, for example) that connect to your bank feed to automatically track and categorise your spending. You might discover you’re spending more on stuff that you really don’t need.

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A simple formula you could follow to save more is the 50 / 30 / 20 hack:

  • Spend 50% of your income on needs;
  • 30% on wants; and
  • 20% on savings.

Set up automatic payments

If possible - pay yourself first! As soon as your wages come in, send them out to your savings accounts. Automate everything (bills, payments and especially savings). This way, you won’t be able to touch your savings easily, however tempting it might be. With your payments automated, you have one less thing to worry about.

Try the 30-day challenge

Ever been in a shop and found an item you just had to buy there and then? For many of us, impulse buying is so natural we don’t even think about it. Whether it’s something simple like a cheeky chocolate muffin in the supermarket or a pair of very expensive shoes, impulse buying can put a dent in your budget and push your savings plan off-track.

The 30-day challenge can help curb those spontaneous purchases.

Here’s how it works; when you see something you like (a dress, some shoes, a new bbq) write it down (in a note on your phone, on the fridge) and leave it there for 30 days.

If, after 30 days you still want it, then you’re allowed to buy it (budget permitting!). What you might find is that by the end of day 30 you may not want those expensive shoes after all. That cheeky chocolate muffin might still be too hard to resist though!   

Talk to your providers

Calling your utility companies might not be everyone’s idea of fun, but it could save you money. You might be paying more for electricity, phone and broadband than you need to. Let’s get that sorted now!

Some power companies may try to entice new customers with tempting deals. A note of caution though, if you’re already on a fixed-term contract with another provider, there may be fees for breaking the existing contract, and break fees should be considered as part of the decision-making process.      

Websites like whatsmynumber.org.nz and Broadband Compare , will help make sure you’re not paying too much for your utilities. You can also just call them - it doesn’t hurt to ask whether any new deals may be available that would suit your requirements. If a rival company has already offered you a better deal to switch, see if your current utility is willing to match or even better the offer.

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Asking family

Getting some financial help from family to get your deposit, may be another suitable option. A guarantor arrangement is a way for family members to use equity in their own homes to help you, without them having to put up any hard cash.

However no decision about being a guarantor should be taken lightly — the family member’s property could be at risk if you fail to make the loan payments. But, if both parties are comfortable with this arrangement, and with the current market proving a challenge for many first-home buyers, asking the family for help may be the way to go.

An income injection 

There’s not much you can do about house prices and interest rates, but you may be able to take steps to increase your income. Consider whether a discussion with your boss is appropriate – when was the last time you got a pay rise at work? Once you’ve prepared your case, arrange to meet with them and discuss those reasons (including any achievements).

For some, extra shifts or even a second job might be another option. Sure, you might work hard already and treasure your time off, but it’s amazing how quickly you can boost your savings with an income boost, even if the extra work is temporary.  

For more help with saving for your first home, get in touch with an Adviser.

Top up your KiwiSaver contributions

Increasing your KiwiSaver contributions to 8% is a handy way to give your deposit a much-needed boost — over three or four years that could mean thousands of extra dollars, depending on how much you earn. You can also boost your savings by topping up your account if you come into a little extra money from overtime, a bonus, pay rise or small direct debit amounts. It all helps.

It’s also a good time to check you’re in the right KiwiSaver fund with our Fund Selector. For example, if you’re planning to use your KiwiSaver savings towards buying your first home in the next five years, you may want your savings deposited in a fund that aims to deliver modest, stable returns as opposed to a fund which could be more volatile.

If your KiwiSaver is with us, you can use My AMP to monitor your account and other investments, and also to top up your KiwiSaver account to boost your balance.    

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Important information

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AMP Wealth Management New Zealand Limited is the issuer of the AMP KiwiSaver Scheme. For a copy of the AMP KiwiSaver Scheme Product Disclosure Statement or Fund Update Booklet please visit amp.co.nz.

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