How much can you save by saving up a deposit?

If buying property seems like something that you will doing in a few years, then now is the time to start saving for it. If you've got a deposit when it's time to buy, then your monthly bond repayments will be lower, you'll be likely to get a better interest rate from the bank and you'll be more likely to be able to buy a property you really love. Jawitz Properties crunches the numbers to showcase what a deposit will do for you.

Lower monthly instalments and less money paid overall

As an example, let's say you want to buy a property for R1 500 000, and you have not saved up any deposit. Assuming that your loan is granted at the current prime interest rate of 7% over 20 years, your monthly repayment will be approximately R11 629, with a total of R2 791 076 to be paid. If you have a deposit of R200 000 to put down, this drops to R10 079, with a total of R2 418 993 to be repaid. That means that over the 20-year loan period, your R200 000 deposit saves you R372 083.

The more you can save, the better, and here's the proof. If you have managed to save up R300 000 by the time you buy your R1 500 000 property, your monthly repayment drops even further, coming in at approximately R9 304 per month, with a total amount repayable of R2 232 861. Over the 20-year duration of your loan, this amounts to savings of R558 215.

Better interest rates from the bank

If you have a deposit saved up, home loan providers see you as a lower risk - and they will reward you with a lower interest rate. Let's once again use the example of deciding to buy a home valued at R1 500 000. As mentioned above, if you approach the banks with no deposit saved up, you'll be paying R11 629 per month, and paying off a total of R2 791 076. Now let's look at the impact of your interest rate. Say the best home loan offer you receive is at an interest rate of prime plus 1.5%, which would currently put you at 8.5%. This pushes your monthly repayments up to R13 017 and hikes the total amount that you will need to repay up to R3 124 164. In a nutshell, the better your interest rate, the less you will pay - both monthly and over the duration of your loan.

Bringing your dream home within reach

To be able to buy your dream property, you'll need to be able to get a home loan for the required amount. Having a nest egg saved up brings down the amount that you will need to borrow. This might just mean that you can buy a home that you love, rather than a home that simply meets your needs.

3 tricks for saving money towards your deposit

1. Set yourself a goal and work towards it. Remind yourself constantly that homeownership is your ultimate goal. Putting smaller amounts of money away in more regular intervals helps keep your eye on this goal and your saving efforts more front of mind and stomachable.
2. Shop around for great deals and make small sacrifices where you can. The key here is to track your spending to keep yourself on target.
3. Cut down on your current rent. If possible, opt for a smaller home or move to a more affordable suburb for now. You'll thank yourself for it when you sign on the dotted line to buy the home of your dreams in your desired suburb.

Once you've got your sizeable deposit saved and you're ready to find the home of your dreams, contact Jawitz Properties. Our #RealPartners are specialists in every corner of South Africa and we'll help you find the right property and walk you through every step of the journey to becoming a homeowner.