Buying a home is a huge desire for many South Africans but for those in their 20s or 30s, it may seem like a goal that can only be reached years later.
In a challenging economic climate, and even the possibility of lingering debt caused by student loans for example, along with daily economic constraints, it may feel like owning your own property is just unattainable.
However, there is light at the end of the tunnel – with a bit of short-term sacrifice, your dream of owning a home may soon become a reality.
Mike Greeff, CEO of Greeff Christie’s International Real Estate says that one way, if not the only way, to ensure that you are taking the necessary steps to buying your Pinterest-inspired dream home, is to start saving for a deposit.
"While it’s a buyers’ market and banks are giving 100% loans - which means no deposit is required), it definitely helps to reduce the cost of buying the property, the amount you borrow from the bank and it will lessen your monthly repayments which means that you will have more breathing room in the long run’’.
Not only will it relieve you of some pressure, but it will also "show the bank that you have discipline needed to save and that you, as a result, have sound and responsible financial habits – giving them even more reason to trust you with a home loan’’.
An additional bonus to having a deposit is that you now have the power to negotiate a better interest rate which again, will lower your repayments and ultimately, the total cost of the home.
Now that you know the benefits of having a deposit, here are some tips on how to save for one – you might feel the pinch, but it will be well worth it in the long haul.
1. Set yourself a goal
As with most big purchases in life, saving for a deposit is easier when you break it up into manageable and realistic steps. In a perfect world, Greeff says, you would want to save "at least 10% of the property value as the deposit so you need to sit down and take a hard look at your finances – now is the time to be stringent and bite the proverbial bullet". You need to look at areas where you can afford to cut down on spending and how you will be able to save more.
Saving for your deposit will and should become your first priority and soon you will find it easy to save more and spend less. You will think twice before buying that coffee on your way to work or going shopping when your favourite store has a sale because you will be seeing the end goal – owning your first dream home.
That leads us to Tip #2…
2. Draw up a monthly budget
Drawing up a budget every month might seem like a tedious and somewhat unpleasant chore, but it is ever so necessary when saving towards something big. Now that you have decided where to cut back, it is time to prepare a new budget. You will need to diligently track your projected spending as well as your set expenses and weigh them up against each other. Of course, unexpected events occur and when they do, you can’t always stick to the budget but insofar as you can, it is recommended to follow it to the tee.
3. Cook more, buy less
After a long day at work, the last thing you want to do when you get home is cook – however, takeaways and ready-made meals are costly and, in the end, they all add up. Instead of convenience foods, spend some time planning your weekly meals, drawing up a shopping list and sticking to it when you go grocery shopping. You can save, on average, a massive R3 000 a month, just by cooking at home. Yes, it might take some extra time, but the savings will add up.
Pack you lunch instead. On average, you can easily spend up to R70 per day, that comes to a total of R1 400 a month – not taking into account that morning cuppa you have on your way to work in the mornings.
4. Ask for an insurance re-evaluation
Our insurance premiums increase every year, but the value of our insured items actually decrease as the years go by. It is advised that you give your broker a call and request a re-evaluation based on current replacement costs. Many insurance companies will drop your rates if you make it clear that you are no longer willing to pay a high premium for something that has dropped in value – particularly cars that can rapidly depreciate.
Just be careful that when the insurance company drops your rates that they don’t increase your excess. It is best to have comparative quotes at hand to help you keep things in perspective and to get the best deal possible.
5. Have a separate account for your savings
If you find yourself dipping into your savings on a regular basis, it might be best to create a separate account that you can deposit your savings into. Greeff suggests that the ideal way would be to ‘’secure your savings in a fixed account, meaning, you can only deposit into the account, but you can’t withdraw for a certain period of time’’. This way indirectly forces you not to touch the money you’re putting away, no matter how dire the situation may seem. ‘’Having a separate account will also help you boost your saving efforts by earning good interest in the long run’’ he says.
6. Keep your eye on the prize
Saving for a deposit on a home is never easy and you’re going to feel the pinch more often that what you’ll like. It’s going to require immense self-discipline and patience, but it will all be worth it in the end. Cancel that unused/barely used gym membership, don’t renew your cellphone contract, buy clothing on sale (if you must) – do whatever you can to save because every little bit counts and each rand you save, brings you that much closer to owning your own home.
You need to determine how important owning your own home is to you – is it important enough to prioritise? Is it important enough to put other things on the backburner for a short period of time? If it is, then do everything in your power to reach your goal and before you know it, in the not-too-distant future, you will be ready to put a sizable deposit down on your very first property.
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