How to Save for a House Deposit
Getting on the property ladder isn’t easy. Property prices in Malta have seen a sharp rise in recent years. It’s getting harder and harder for first-time buyers to get their foot in the door, if you’ll pardon the pun. It’s not just getting more expensive to buy, it’s getting more expensive to rent, too! If you’re renting whilst trying to save for your first home, it can be really demoralising to think that you’re spending the majority of your pay check on someone else’s mortgage repayments, instead of your own. The dream of owning your own home slips further and further away from you each month, just like all your hard-earned money. To buy a house, you need a deposit. But how on earth are you supposed to save for a deposit when you can barely afford your rent?
Usually, you’ll need to put down a deposit equal to 10% of value of the property you’re looking to buy. On a €200,000 property (the average price of a decent one-bedroom apartment in Malta (at time of writing)), that’s €20,000. According to a survey made just last year, that’s €2,000 more than the average yearly salary in Malta! By the time you’ve managed to save up that amount of money, property prices might have doubled or even tripled – rendering your 10% deposit inadequate. So, what’s the solution? Will you ever be able to save up enough money to be able to buy your own home? If you’re sick of paying rent and you’re dying to move into your own house, there’s no time like the present to start saving. Let your frustration be your motivation as you watch the pennies accumulate! Here are some of the best tips out there to help you get closer to your dream of being a homeowner. Remember, you can do anything if you put your mind to it, so happy saving!
Reduce the amount you spend on rent
If you’re not a homeowner, your rent is probably your biggest monthly expense. That’s exactly why it’s super important to save as much on your rent as possible. The general advice is to spend about 30% of your monthly salary on rent. So, if you earn €2,000 a month (before taxes), then you should be spending no more than €600 a month on rent. If you’re spending a lot more than 30% of your salary on your rent, then find somewhere cheaper as soon as possible. You might not find somewhere as nice, but it’ll be worth it when you find yourself sitting on your own couch in your own living room. If you can find somewhere for even less than 30% of your salary (like a room, for example), then go for it and save the difference! Even better (and I know this might sound like your worst nightmare), move back in with your parents or your in-laws if possible. This is no time to worry about your pride. Put everything you would be spending on rent in a savings account instead. It might not be the ideal situation but it’s only temporary. Besides, if you do have somewhere to go and live rent-free, you should consider yourself lucky!
Cut back on unnecessary expenses
Of course, it doesn’t matter what you’re saving for, you can’t cut out the necessary expenses. You still need to spend money on rent, bills, food and travel etc. but what about the luxuries? If you’ve got somewhere to cook, don’t buy takeaway. If you’ve got already got a coat, don’t buy a new one. Even if it’s on sale! Think just because it’s down to €80 from €100 that it means you’re saving €20? You’re not. You’re spending €80! If there are things that can wait to be bought until after you’ve got the keys to your first home, then let them wait.
Be strict but motivational
When you’re saving for a deposit, you need to be strict with yourself. You’re not going to magically save up enough for a 10% deposit without making any effort or any sacrifices. Go through your monthly expenditure, set a reasonable budget and stick to it. Wherever you can make savings, do so. Don’t always go for brand names; look for offers at the supermarket; car share; shop around for cheaper internet/phone/insurance. There’s always somewhere you can make a saving. Don’t forget to motivate yourself, though. If you make yourself miserable, you won’t want to keep on saving! Obviously cooking at home is cheaper than getting takeaway but if getting a takeaway as a reward for cooking 15 days in a row will motivate you to cook for the next 15, then go for it! Treat yourself occasionally with small things and you’ll automatically give yourself the motivation you need to keep on going.
Rid yourself of debts or loans
Overdrafts, car loans, student loans… they all count. Pay these off as soon as possible. Not only will it be a weight off your shoulders but, once they’re paid off, you’ll have more to save. What’s more, any loans you already have will reduce your borrowing potential. This means that the bank will lend you less when it comes to applying for your mortgage. If you can’t do it on your salary, look to supplement your income any way you can. Is there any way you can earn a second income? If there are any skills you have that could earn you money on the side, this is the time to let them shine! Tutoring, babysitting, waiting tables, freelancing, cleaning. Even if it’s just a few extra hours a week, it all helps.
Save straight from your pay check
As soon as you get paid, put some aside. Every article you read that gives you saving tips will give the same advice. If you wait until the end of the month and then put away the money you have left, you’ll most likely end up saving little to nothing. The best way to save is to take it straight out of your pay check. Pretend that €100 or €200 euros never even went into your account. Act like you didn’t earn it. Save first and live off the rest. You’ll be surprised how far you can make it stretch, especially when you have a goal. Every time you want to dip into your savings to buy something, imagine relaxing in your own home and how good it will feel! If you really don’t trust yourself not to touch your savings, put your money away somewhere you can’t touch it. These types of savings accounts (where you can’t touch your money) also often offer high interest rates, which is even better for you!
Involve your family or friends
There are plenty of ways your friends and family can help you on the road to becoming a first-time buyer. Perhaps they can help you simply by encouraging you to stick to your budget. Or maybe, just maybe, there’s someone in your family who would be willing to lend you the money for a deposit? You never know unless you ask and, as the saying goes, if you don’t ask, you don’t get. Or, maybe a sibling or a friend might want to buy a place with you. If you can’t afford somewhere by yourself, chances are you know somebody else in the same position and you can help each other.
These saving tips are sure to help you save like a boss! Keep your goal in sight, stay motivated and you’ll be looking to buy your first home in no time. When you’re ready to start looking, get in touch with our experts. Zanzi Homes will be with you every step of the way and will work as hard as you to get you the keys to your first house!