How to Save for a Home Deposit

04 March, 2024: One of the most significant hurdles that aspiring homeowners face is accumulating sufficient funds for a home deposit. With the rising cost of living and the multi-decade boom in the property market, this hefty upfront requirement can be challenging to save for. Many Australians utilise traditional strategies to save for the deposit. However, there are innovative solutions emerging like FrontYa that help to boost your current savings to get you onto the property ladder sooner.

A ‘Home Deposit’

A home deposit, often referred to as a down payment, is the initial contribution that a home buyer makes towards the purchase of a property. It represents a percentage of the total price of the home, and it helps you to secure the property that is up for sale. It is a requirement for lenders to prove and indicate your financial commitment and capability. The larger the deposit, the smaller your loan amount, paving the way for smaller monthly repayments and a more favourable interest rate.

Increasing Your Home Deposit

Do you have your dream property in mind but feel frustrated because you just can’t get the savings you need to unlock it? Here are some actionable tips to give it the boost it needs:

  1. Savings Plan: A disciplined approach to budgeting can help increase your home deposit. Put aside a fixed portion of your earnings each time you get paid and consider leveraging tools like automatic transfers to ensure you’re consistent in sticking to the plan.
  2. Switch Savings Accounts: If you decide to keep your money in a savings account, ensure that it is one that offers a competitive interest rate that helps your savings grow. If you can receive a higher interest rate elsewhere, consider switching to achieve a higher return.
  3. Clever Investing: Explore different investment options like shares and bonds that can offer higher returns than your average savings account. Consider speaking to a finance professional to explore your risk appetite, timing, and liquidity requirements.
  4. Extra Cash Flow: Take on a side hustle to generate an additional income stream or consider switching your role or company to one that pays better.
  5. Windfalls: If you’re fortunate enough to receive a monetary gift or if you get a big tax return, think about channelling it towards your home deposit.
  6. Stay at Home or Relocate: Continue living with your parents whilst saving if you’re in a fortunate enough position to do so. If not, consider temporarily relocating to an area with lower rent to put that extra money towards your deposit.

Whilst the above tips can be effective, many still struggle with these traditional savings methods. Therefore, it is worthwhile exploring other potential ‘deposit gap’ solutions like shared equity.

Both the Federal and State Governments have shared equity schemes in place to help aspiring homeowners’ step onto the property ladder without the daunting upfront cost requirements. Whilst they are a great solution for those who qualify, there are many Australians who are not eligible due to the strict criteria around household income, family composition, purchase price and location. For example, the NSW Shared Equity Home Buyer Helper is targeted at singles and key workers with maximum gross annual incomes of $93,200 for singles and $124,200 for couples.

So, if you can’t save enough for your home deposit and you don’t qualify for the government programs, what other options are there?

FrontYa is an innovative solution that employs a unique financing solution combined with AI-based underwriting to assist prospective homebuyers overcome the deposit hurdle. FrontYa provides half of the deposit and stamp duty, in exchange for the return of their capital plus a share in the home’s increase in value over a typical six-year term.

Key Insight: FrontYa is a co-investor in your property and is not considered debt or a loan, meaning that by partnering with FrontYa, your serviceability will not be adversely affected. There are also no upfront costs or ongoing fees, compulsory repayments, interest, or personal guarantee required.

To understand how FrontYa can help to boost your home deposit, contact us today.