Few first-time home buyers understand the importance of a deposit and why it’s a good idea to save for a home deposit when considering your first buy. Even though there are many lenders in South Africa that offers a loan amount that could possibly cover 100% of the asking price, few actually qualify their clients for it and many buyers are left having to pay anywhere between 10%-22% of the asking price in the form of a deposit.
Since it isn’t possible for most South Africans to pay cash for a new house, many have begun looking for solutions and tips on how to save as much money as possible to get them their dream home.
The easiest way to start saving for a home deposit is to open a savings account at your bank, creating a monthly debit order that will automatically move a set amount of money on the day of your choice and then basically ignoring it for as long as you can. If you are worried that you might use the money for other purposes, then having a 30-day account will be a useful deterrent from accessing your account when the urge strikes.
Cut back on your spending. Cooking at home instead of having regular take-out and cutting back on impulse shopping, are great ways to get started. If you can put this extra money towards your deposit, you will be able to reach your goal in no time at all.
Analyse your financial situation and identify the areas where you can easily put money aside. Cancel unused memberships and accounts and learn to be a bit thriftier to boost your savings.
If you can manage to optimize your monthly saving, you could have your 10% deposit sooner than you might think. Depending on the price of the home you’re looking at and the money you were able to save.
The Importance Of A Deposit
Most South African buyers need to have a large deposit at the ready when buying their first home. Factors like your current credit score and your combined household income are all determining factors to the eventual value of the deposit that you’ll require.
With the current average gross income of R20, 004 per month, saving for a deposit is often the only way to make it possible to even consider buying a home. This also means that the average age for South Africans yet to buy a home is currently between 34 and 37, since earning potentials need to be much higher than years gone by.
The important thing is to not lose your courage while saving. It may take some time, but staying patient and persistent will go a long way toward taking the next steps towards your dream home. Take the time to get everything in place, including improving your credit score where you can and deciding on the suburb that you would like to move to.
A great benefit of saving to accumulate as much as you can is that you will be able to transfer the full amount towards your new home and effectively lessen your bond repayments since your loan amount will be smaller. This alone is a fantastic reason to save as much as you can before buying and will give lenders a better incentive to assist you.
For more useful tips on buying your first home, read our articles on building a good credit history and considerations when buying a home for the first time.