Saving for Your Home’s Deposit and Closing Costs

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So many of us put off homeownership because saving for the deposit seems daunting, but with smart budgeting and these 8 great tips from our VMBS experts the journey to your new home will feel more like a cruise than an uphill climb.

1. Set a Goal:
There’s nothing like a good bit of motivation, setting a firm target gives you something specific to work towards. Look at the average cost of homes in your target neighbourhood and use this price to sort out the deposit you’ll need. You should also save for moving expenses and closing costs, which are the processing charges, taxes and legal and agent fees you’ll have to pay in order to purchase a home. The VMBS mortgage calculator on vmbs.com gives you an estimate for deposit and closing costs required based on the price of the property. A rule of thumb your deposit should be at least 20% of the property value; although there are home loan options to suit a deposit as low as 5%, you may find that you have to pay a higher interest rate, more in mortgage indemnity insurance and legal fees.

2. Adopt VMBS’s One Less principle:
You have a target, now let’s start saving, if you have a hard time saving, hold off on all non-essential purchases for seven days, at the end of the week you’ll find that you’ve lost interest in some of them, imagine the potential of those weekly savings over a year.

3. Unfix it:
Who says your fixed costs are fixed?Month to month we budget for spending a relatively set amount on phone contracts, gym memberships, groceries and utilities. It’s time to separate your wants and your needs; you’ll find that you actually may be able to cut back. Form a walking group in your neighbourhood to save on a gym membership, give those texting fingers a rest and get a smaller data plan, switch to less expensive brands at the supermarket or swap your bulbs and faucets for more energy efficient and low-flow options respectively.

4. Rethink your rental:
Rent a smaller space, get a roommate or move back in with parents to cut back on rental expenses, you could be paying yourself some of the money you’re paying your landlord.

5. Put your cash on the top shelf
Automating your savings through the use of salary deductions with high-interest accounts like VMBS’s i-Save is a savers best friend. Your money is automatically put into an account using salary deductions; you won’t miss what you don’t see. It’s like putting cookies on the top shelf of your pantry so you aren’t tempted to eat them, only with i-Save your cookie multiply. I-Save for Home offers rates of up to 6% depending on the amount you commit to saving over at least a year.

6. Put your money to work
If you come into a lump sum payment, whether through a partner plan or  your year-end bonus, invest your funds so they get you to your goal faster, if your home is a part of a 5-10 year plan VMBS’s Money Maker, tax free account, is for you. The VMBS i-Gain Fixed Deposit account is a great option maximise returns if you are hoping to purchase property in 3-5 years.

7. Park your car
Car payments and maintenance costs add up fast, switching to a smaller car saves on monthly repayments and fuel costs, another cost saver is carpooling. Sharing a ride with just one person means you both save on fuel and wear-and-tear on your car.

8. Get Crafty
If you sew, garden, bake, do nails, or fix computers? If you fancy yourself to be a handyman, you can turn your hobby into money. It may even serve you well to do a short course to become more proficient at your skill. Not only will you earn additional income but you’ll enjoy the time spent doing the things you love the most.

Wherever you are, there are many ways to get to your deposit, so use our deposit guide and come in to any of our VMBS branches islandwide and have a chat with one of our homeownership experts. We’ve spent decades thinking about how to make your dream home possible.

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