When you’re self-employed you know only too well, your income can vary month to month. It makes saving up for a home pretty tough going if you aren’t on top of your savings plan. As part of showing potential lenders you’re a good candidate for a home loan, it is wise to have a history of steady, regular savings
Here are five ways to assist with saving for a house deposit.
1. Be smart with taxes
Being self-employed means there are tax deductions for business-related expenses that can really add up to help you save. These might include things like home office expenses. Check out the ATO website or have a chat with a qualified tax professional or an accountant who can help determine what you can claim.
2. Set yourself a target
Work out where you want to live first, then calculate how much you need to save for a deposit in that area – and don’t forget to add on those extra costs like stamp duty, legal fees, building and pest as well as the rates & water adjustment. Depending on the product you‘re applying for, different lenders may charge different fees such as application fees and annual fees. It’s technically possible to get a loan with an 8% deposit, but hitting the 20% target will help you avoid extra fees like lenders mortgage insurance.
3. Doing well? Save more
Don’t be tempted to splash out and reward yourself when things are going well and you’re earning more money,– keep your eye on the prize; your new home. Instead put a small amount aside to spend and the rest to saving for the main goal. The bigger the deposit upfront means you are likely to pay less or avoid lenders mortgage insurance and the overall interest cost will be lower.
4. Watch your progress
We all respond to visual reminders – we all do. Make a wall chart or app to keep track of your savings target, so it is always front of mind and you can see it grow when you add each new amount to the top.
5. Protect your income
If you can’t work because of injury or illness, income protection insurance can help cover for lost income so you don’t use your deposit savings to live on. ASIC's Money Smart website offers some good tips and information about income protection insurance that’s worth checking out.