Saving strategies: putting together the deposit for your first home

First things first - why do you need a deposit when you want to start shopping for your first home? For starters, having a deposit means you need to borrow less money from the bank. For example, if you're looking to buy a starter home for R1 000 000 and you have R200 000 saved up, you're only going to need a home loan of R800 000. This shows the bank that you're financially responsible and makes you more like to get a favourable interest rate on your loan. Plus, it means that your monthly bond repayment will make much less of a dent in your budget. By spending some time browsing the real estate on offer, you can get a realistic idea of what you want to buy and how much it's going to cost you. Then, it's time to start saving in three easy steps!

Step 1: Get your priorities straight

Set a budget and stick to it. Be tough on yourself about what you do and don't need. Realising that you don't need the latest iPhone can save you hundreds of Rand every month — and so can skipping that morning coffee from your favourite fast-food establishment. It's worth spending some time shopping around to find out what you could be saving on your insurance premiums and other policies. Another question to ask yourself is whether it's worth renewing that gym contract if you're only gymming twice a month.

Step 2: Open the right kind of savings account

Not all savings accounts are created equally, and no matter who you bank with, there will be different accounts on offer. It's important to take the time to research the various accounts on offer and find one that will make your money work hard for you. Another way to save money is to invest in unit trusts. In a nutshell, unit trusts are a type of investment in which funds are pooled and managed by professionals to get you the best possible returns for you. When investing in unit trusts, there are several choices to be made, which includes what your appetite for risk is. These decisions should be made in consultation with an accredited financial advisor.

Saving is not something you do at the end of the month with whatever money is left over, because life dictates that there will often be nothing left over. Putting money into a separate account or investment to save towards your deposit needs to be treated like any other debit order that goes off your account at the beginning of every month.

Step 3: Use every opportunity to save

When thinking of ways to save money, get creative. If you are renting a property, ask yourself whether you could rent a smaller home next time your lease is up. A smaller home may mean less rent, which provides money to save for your deposit. If you get a year-end bonus, put as much of it as possible into your savings account. Keep track of what you spend, make WhatsApp calls instead of phone calls whenever possible and plan your meals to avoid impulse fast food purchases.

Need some motivation to save?

Over and above paying for the deposit that you put down on your property, your savings will also need to cover the legal and administrative costs of purchasing property, which include transfer duties if you are buying property for more than R1 000 000. A quick look at a bond calculator shows that, if you are granted an interest rate of 7% and take your loan over 20 years, your repayment will be approximately R7 752.99 per month. If, however, you have managed to save R200 000, that monthly payment drops to approximately R6 202.39 per month. That's a saving of more than R1 500 per month, or at least R18 607.20 in your first year of homeownership! Those kinds of savings are worth saving for.

Buying a home is likely to be one of the most significant financial transactions of your life. Saving towards it is undoubtedly one of the most worthwhile things you can ever do. Contact Jawitz Properties for more advice on saving, home loans and finding the perfect property for you.