10 ways to save your home deposit in just two years

4 Jun 2018

This is according to Paul Stevens, CEO of Just Property, who says a deposit is the initial payment buyers make to secure the purchase of a property. It’s not meant to cover the extra costs involved in purchasing property, but rather to:

Improve your affordability and up your chances of getting your bond approved.
Put you in a better position to negotiate a more favourable interest rate since there is lower risk for the bank involved.
Save on interest being paid over the loan period.
Reduce your monthly instalment/bond repayment.
Make you more attractive to sellers.
Increase your negotiating edge.
First-time home buyers looking to buy a R1 million property may be approved for a 100% bond, but if they aren’t, a 10% deposit or R100 000 is likely to be required.

Those who have not yet entered the property market are often daunted by the amount required for a deposit on a home loan. However, Stevens says that a few temporary tweaks to their lifestyle and spending habits could get them a foot in the property door and, once they’ve purchased a property, significantly reduce their long-term bond repayments.

Here are 10 things that you can do immediately to start saving for a deposit:

Saving R100 000 over two years gives you a R50 000 target per year. Aim for R4 500 a month, Stevens advises, as some months you’ll come in a bit above, and some months a bit below.

Does finding an extra R4 500 sound difficult when you still have to cover living expenses? The trick, says Stevens, is to keep telling yourself that it’s just for two years. The short-term sacrifices will be worth it.

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1. What do you absolutely love?

Is really good coffee that gets you up in the morning? Choose three little luxuries, and at the beginning of the month buy those. Everything else, whether cosmetics, cleaning supplies, socks, jam, whatever, compare prices, and choose the cheapest.

In your weekly shopping, stick to what you need and only buy specials. Look at what you could save at a different supermarket or wholesalers. “Some of our clients say that simply changing supermarkets has saved them R1 000 a month,” says Stevens.

2. When you get paid, save first

Put your savings away at the beginning of the month. Aiming to save what’s left over is not as efficient. And put your savings into a call account where you can reach them if you need them, but it’s not easy to access them on a whim. You’ll also get more interest.

3. Make your own lunches instead of buying takeaways

Preparing your meals is a significant saving. Keep takeaways for emergencies only, or a once-a-month treat.

4. Cars are depreciating assets

If you’re a couple, do you really need two? Why not sell one and buy a scooter instead, make do with just one vehicle, or exchange the most expensive vehicle for a cheaper one. Yes, we know, you love your car, but you’re going to love owning your own home.

5. When last did you get an insurance evaluation?

Your car situation has changed, and maybe other assets have depreciated. Give your broker a call, and shop around to see what your options are.

6. When it’s time to move, you don’t want to lug all that junk with you

As they say in the ads: “Sell it!”. And while you’re on OLX, keep an eye out for bargains you can sell for more than you pay for them. Just be very careful in this regard - you don’t want to wipe out your savings if you get it wrong.

7. Maybe skip the cell phone upgrade

You’re giving yourself two years to save your deposit, so maybe you don’t need a cell phone upgrade? In fact, when your contract renewal rolls around, why not take a lower package. It’s just for two years.

8. Create a second income stream by freelancing or getting another job

Get a Saturday or Sunday waiting job. You can do this. Get the money paid directly into your savings account.

9. Downscale temporarily

You’ve cleared your junk, so maybe you could move to a smaller rental unit for two years and pay less rent? It’s only temporary, and when you leave the smaller place, it will be to move into your own home. That’s worth the sacrifices.

10. Save all extras

Put any bonuses, gifts or commission into your savings account.

More savings ideas

Can you think of more ideas? Do you need that gym membership, or could you go for a run instead? Look at your life and see where else you can cut your spending. Just remember to leave yourself some cash for a night out, and keep buying that special coffee, advises Stevens. You’ll lose heart if you have nothing to look forward to.

And once you’re ready to put down your deposit, remember not to exceed your budget - it’s easy to fall in love with a bigger home, but remember: this is your start up.

“Buyers should purchase what they can easily afford and look for homes that offer letting opportunities. If there’s a room or a granny flat that can be rented out, that income can into be added to the bond repayments and reduce the time it takes to pay off the bond,” says Stevens.

Once you’ve bought your home, your focus now is on paying off your bond as fast as possible. “Ease up on the pressure to save by all means, but keep some of those restrictions in place,” Stevens adds. “The quicker owners pay off their bond, the less they’ll be paying in interest.”