Buying and owning a house is a huge desire for many South Africans but the prospect of being able to do so in your 20s or 30s may seem like a pipe dream. Inflated property prices, a difficult economic landscape and possibly even the restraints of lingering debts (such as student loans) may leave you feeling that owning property is simply unattainable. Don’t worry—you’re not alone, many people of all ages are still renting for this very reason.
One way to ensure that you make achievable steps towards your future home is to start saving for a deposit. While it’s not required for potential buyers to have a deposit to purchase a property (in some cases it is possible to get full household loans), it certainly helps to offset the enormous cost of buying property; the less you borrow from the bank, the less your monthly repayments will be and the less your overall cost of the house will be. By saving a substantial deposit, you also show banks that you're self-disciplined enough to put money away and probably have sound financial habits. This gives banks more reason to trust you with a home loan. In fact, you may even have more bargaining power with the banks; depending on your deposit, you could negotiate a lower home loan interest rate, which, once again, will impact your monthly repayments and the total cost of the house.
Here are some of our top tips on how to save for a deposit on your future home:
As with most things in life, saving for a deposit on a house is easier when you break it up into manageable steps and when you set yourself a realistic goal—‘realistic’ being the operative word. Ideally, you would want to have 10 to 12% of your dream property value set aside as the deposit, which is paid upfront. So sit down and think about how much you want to save for your deposit and then take a hard look at your finances; where can you afford cut down? How can you save more and in which areas of your life might you be overspending?
Make saving for a house your number one priority and you’ll soon find it easy to cut down on things like eating out so much and splurging on new clothes. Use the idea of your dream house as motivation—whenever you feel the urge to spend, weigh up what is more important to you, a luxury purchase or your future abode? Once you have decided where you can save and cut back, prepare a new budget and stick to it by making sure that you put your savings away the minute your paycheck clears.
One of the best ways to make sure that you’re keeping to your budget and not overspending frivolously, is to track your spending. While setting up a spreadsheet to do this is noble, it’s also largely impractical and often results in certain purchases being forgotten and falling through the cracks.
Rather embrace the technological age we live in and opt for a budgeting programme or app, much like the excellent (and free) app 22seven. With this savvy application, you can track your money as well as set up a personalised budget, invest your money simply and have all your financial records in one place. This way, you have full control over your finances, budget and spending habits.
One of the best ways to ensure that you can save for your deposit is to cut down on needless spending. Here are some of the ways to do that:
One of the best ways to ensure that you’re able to actively save for a deposit on a house is to cut back your expenditure in other areas of your life. If you are not sure where to begin, than it’s a good idea to start by taking a look at what you spend on your current accommodation. What portion of your income does your rent demands? If it’s anything from 30% onwards, it’s time to look for a more affordable place. Find accommodation you share with others, opt for a smaller room or move to a less expensive area—don’t pay an inordinate amount of money towards someone else’s home loan when you can save for your own.
It probably doesn’t take too much for you to want to pack your bags and hop on a plane to some exotic destination with all of your savings; all you need to do is take a look at your favourite social media platform and you’re bound to be faced with photo after photo of awesome adventures your friends are having. But to save enough for a decent deposit for a house, the chances are you’ll need to focus all of your savings on that. That’s not to say you can never go surfing in Hawaii or hot air ballooning in Turkey, you might just need to exercise a little patience and put it off for a little while—right now, rather invest in something you can one day own (and live in!) opposed “investing” in fleeting experiences. Your time to travel will still come (if you want it badly enough).
There’s no doubt that “every little bit adds up” over time. Do what you can to buy what you need to but at the best possible prices. You can aim to plan your meals around items at the store that were on special, join loyalty programmes and sign up for email lists that notify you of sales—saving on the necessities means you can lower your budget and save more for the deposit on your future home.
One of the best things you can do when saving for a deposit on your future house is to create a separate savings account for it. This way, you don’t risk tapping into the money you would like saved for a deposit; you know that it’s strictly off limits. Not only that, but it will help you boost your saving efforts by earning good interest in the long run. Open a fixed deposit account or a savings account that yields high interest. If you put these savings into an account from which you could draw money at any time, this fund could also double as an emergency fund if you don’t already have one.
The bottom line when it comes to saving for a deposit on your future house is that it’s not easy. It’s going to require a lot of patience and self-discipline and it’s crucial to keep your eye on the prize. Cancel that unused gym membership, don’t upgrade your phone contract, reassess your insurance, cook more at home and buy clothes on sale; every bit you save brings you that much closer to owning your own home.
Figure out how important owning your own home really is to you—is it important enough to prioritise it and let any other thing you may want to do (like travel) take a backseat? Then give it your all and in the not-too-distant future, you’ll be ready to put a deposit down for your own property.