Save for a deposit sooner

Property ownership is a goal for many Australians, yet saving for a deposit is becoming an even greater challenge as potential buyers juggle higher living costs and smaller disposable household incomes. Hundreds of thousands still manage to achieve the dream each year by using traditional budgeting and saving techniques, such as setting a target, formulating a plan and carefully managing their cashflow. However, some borrowers are exploring unconventional ways to help them save for a deposit sooner, according to Mortgage Choice. ‘‘Over the past five years, rents have increased at a faster rate than property values, a trend that may well continue alongside rental vacancy shortages in most capital cities,’’ spokesperson Kristy Sheppard said. ‘‘Rising rental payments and other living expenses are adding financial pressure to many aspiring buyers trying to save for a deposit and associated purchase costs.’’ Back up your budget with the help of the following savings strategies:

Boost your efforts by a high interest savings account. Set up an auto-transfers from your salary or open a First Home Saver Account, which attracts a lower tax rate on interest earned (15 per cent) and a government contribution on the first $5000 you deposit each year.

If selling an asset to build your deposit, plan ahead. Most lenders require you to have a genuine savings deposit. Typically, this is money saved and held over at least three recent successive months and excludes lump sum deposits from the sale of personal assets. Research what you need.

Some lenders accept rental payments as evidence of genuine savings on the basis you have at least a 5 per cent deposit plus there is evidence of six to 12 months worth of continuous rental history and the property is leased through a licensed property manager.

Ask family to guarantee your loan by using their own property as security. While this will not put you steps ahead with your loan deposit, the guarantor will help you bridge the deposit gap (in theory only, as the guarantee is not money) and avoid paying lenders’ mortgage insurance.

Cut your expenses in half by splitting the buy with a co-owner. Sharing the costs with one or more people can increase the deposit amount, helping you to enter the market sooner and with greater borrowing capacity.

To see how quickly you can save a deposit visit Mortgage Choice’s savings target calculator: www.mortgagechoice.com.au/ calculators/achieve-my-savings-targetcalculator.aspx