Saving up for a deposit on your first home can be difficult in today’s economic climate, especially when you consider the transfer, attorney and bond fees that also have to come directly out of your pocket. That said, a sizeable deposit can make all the difference to the long-term affordability of your home and affects your home loan application in several ways.
Firstly, it shows the bank you are financially responsible, which lowers your risk profile. Secondly, it reduces the size of the bond you’ll need, which also decreases your risk from the bank’s perspective. Thirdly, with a low-risk profile you’ll have a better chance of securing finance at a favourable interest rate; this, alongside a reduced loan amount, can drop the total interest you’ll pay over the life of your bond by hundreds of thousands of rand.
In addition to the financial benefits, a deposit can also help strengthen your offer to purchase, as sellers and estate agents see deposits as good indications of a buyer’s ability to secure a loan. Currently, a deposit can range anywhere between 9% and 16% of the property’s value.
So how, exactly, does one save up an amount of such nature? Here are five ways to start the ball rolling.
- Cook more, buy less
We all need to eat, but convenience foods can add up and become costly. So, instead of grabbing ready-made meals, ordering in or eating out, spend a little more time planning your (simple and easy) meals and then cooking them in your kitchen. It might take 30 to 60 minutes out of your day to do, but the savings will add up (plus its healthier)!
Another great idea to pack lunch for work instead heading to the takeout spot around the corner from your office every day – where you can easily spend up to R75 - R100 a day. All in all, you can save up to R3000 a month! And if you can forgo that morning cappuccino, you could even more!
- Cut back on credit and media subscriptions
Credit cards and store accounts might make life easier, but they’re also a great way to spend more than you really should. If you find yourself giving into temptation and shopping for more than just the bare necessities, it might be better to close your accounts until your deposit is ready to go.
Look at your digital, print, and media subscriptions. Check out your DSTV, Netflix, Showmax, and Amazon Prime usage. Maybe for a time, choose only one of these streaming services so that you can free up some cash monthly. You can also go through your print and software subscriptions and all other smaller categories of spending to decide if you are willing to cut back.
Better yet challenge yourself and your family and ditch TV altogether for a few months. Get creative at home and create your own book nook to spend more quality time with the family. Remember that making these cuts doesn't have to be permanent but it can be a great exercise to free up some money during this difficult season.
- Ask for an insurance re-evaluation
Your insurance premiums go up every year, but the value of many of your insured items actually goes down as they get older. If you haven’t spoken to your insurance company in a while, it’s a good idea to give them a call and ask for a premium re-evaluation based on present day replacement costs.
A lot of insurance companies will drop your rates significantly if you make it clear that you’re unhappy with your premiums – particularly for items like cars that devalue quickly as they age. Just be careful that they don’t drop your rates by increasing your excess – having a few comparative quotes on hand will help keep things in perspective.
- Think twice before taking that cellphone upgrade
It’s easy to be swayed by the idea of a shiny new handset when your cellphone contract expires, and to blindly sign on the dotted line for a contract that could well be more than you actually need to pay.
Luckily nowadays number portability is an option, which means you have a lot more options at contract renewal time. So shop around to find the best deals and to save money: take a close look at your usage patterns, and decided whether you really need a new phone right away, and then find the most affordable contract that suits your needs from whichever service provider has the best offer.
- Add some natural scenery to you work out routine
If you’re not actively engaged in a gym routine and have a gym membership, you’re probably just throwing hundreds of rand a month down the drain – yes, our good intentions can be costly!
Even if you gym once or twice a week, opting for the scenic nature outdoors or your beautiful backyard over a treadmill can save plenty of Rands that can go towards your deposit. There are all kinds of fitness routines available online or apps that won’t cost a cent.
Some of these tips might seem like they require a lot of effort and energy but it is well worth it when you can unlock some extra money each month and create a more secure future for you and your family in your new dream home!
