'Keep trucking along': Expert tips for saving a first home deposit

Financial and real estate experts share their top five tips for people finding it hard to save a deposit.
Financial and real estate experts share their top five tips for people finding it hard to save a deposit. Photo credit: Getty.

Experts say one of the golden rules for saving a deposit for a first home is to pay off expensive debt first. 

And for Kiwis grappling with rising rents and food costs, they suggest starting to save just $5 to $20 each week, to build a savings habit. 

From mid-2021, the Reserve Bank is forecasting house price growth to slow, from 22 percent to 5.6 percent in 2023. The Government housing announcement has introduced a raft of changes to help first home buyers, with the bright-line extension and phased out interest deductibility aimed at reducing investor speculation.  

Although there's some evidence of a drop in buyers attending open homes, experts say any impact of the changes on house price growth won't show up until May or June.

As buying a first home starts with saving a deposit, Newshub asked a group of experts to share their top saving tips to put first home buyers in the best position to buy. 

1. Pay off expensive debt first 

Start with a clean slate: pay off short-term debt such as credit cards, hire purchases, car loans and personal loans, first.  

These loans have interest rates from 6.99 to 20.95 percent and can attract extra fees if repayments are late.

First home specialist at Money Empire Lisa Barton says when applying for a mortgage, the less short-term debts people have the better.

"Trying to clear short-term debt makes it harder to save...if you have several short-term debts with various companies, look at consolidating all the debt into one loan on a lower rate to help you meet the payments and pay it down faster." 

If after consolidating the debt the payments are significantly lower than before, Barton suggests putting some or all of the difference into a separate savings account.

2. Start small to form a savings habit

Saving $10,000 - or even $1000 can seem like a huge sacrifice. 

But the secret is to start small and build a savings habit.

For people, including young families with high expenses, Barton suggests saving just $5 per week or fortnight.

"You can slowly increase it each fortnight or month, or as you get paid," Barton says.

Saving for something worthwhile provides a sense of achievement. 

"Pay the money into a separate account (you could nickname it 'My house savings') and set yourself a goal for each month," Barton suggests.

3. Rally support

Sharing goals with friends and family give them the opportunity to help, whether it's splitting bills, meeting at home rather than the local bar or cafe, or just keeping savers accountable.  

Financial educator and property investor Lisa Dudson says keeping savings goals top-of-mind and feeling positive about them makes them easier to achieve.

"Let friends and family know that your goal of buying a home is really important and that you don't want to spend money unless you have to," Dudson suggests.

"This will take the pressure off when you say you can't do something - or want to change how you do it, so you save money."

Once a savings habit is formed, a goal might be to increase monthly savings by $5 or $10.

4. Talk to a mortgage broker early

Pat Lalalapa, a real estate agent specialising in South Auckland, says some of the more creative ways people are buying homes include siblings buying together, and parents 'gifting equity'.

He says if buyers assume they need to save a full 20 percent deposit, they may miss the market. Before setting a savings target, he recommends talking to a mortgage broker.

"Even if you've only got 10 percent deposit, to get an idea of where you sit, I recommend you talk to a broker first," Lalalapa says.

Visiting open homes, staying up-to-date with agents and calling or emailing to see what properties sold for will help buyers stay informed for when it comes time to buy.

"This will give you good comparisons so you're able to get market knowledge for when you buy for yourself," Lalalapa says.

5. Monitor progress

As with any goal, checking progress regularly allows adjustments to be made to keep savings on track.

"Track your progress in a way that's meaningful to you and somewhere you can see it often," Dudon says.

And if savings fall by the wayside because an unexpected cost pops up, it's important to keep the faith and get saving again.  

"Remember, every dollar counts...on its own, it doesn't seem significant but it absolutely adds up over time so keep trucking along."

And don't forget to celebrate savings milestones along the way. 

The KiwiSaver first home withdrawal, allows KiwiSaver members of at least three years to withdraw most of their savings to buy a first home. First home buyers should also check if they're eligible for a First Home Grant of $5000 or $10,000, or a First Home Loan requiring a 5 percent deposit