Thinking of buying your dream home, but can’t save enough for a deposit? 

Luckily, there are some things you can do to put more money aside, but it takes a lot of budgeting and discipline. 

Here are 8 tips on how to save for a home deposit while renting that might work for you. 

How to Save for a Mortgage While Renting

1. Calculate how much you would need for a new home

The first thing to do is figure out how much you actually need to save. Compare prices of the types of properties you would be interested in to get a rough idea of how far your budget can go. 

You can then estimate how much you can put down as a deposit on the home. Usually, lenders ask for a 20% deposit, however, there are some that are willing to accept a 5% or 10% down payment on a home loan. 

Once you have the numbers, you can use a mortgage calculator to get an approximation of what you would be paying every month in instalments, which, in turn, will give you a realistic saving target. 

Key points to keep in mind:

  • The bigger the deposit, the lower your mortgage and repayments will be, so try and save as much as you can. Plus, if you can’t put down the required 20%, you will have to pay lenders mortgage insurance as well.
  • Be realistic! A property may tick all your boxes, but if it’s out of your budget, take a look at cheaper homes—there are plenty of lower-priced houses in great locations across the country.
  • Talk to a mortgage broker. They will be able to tell you more about the kind of mortgage you can afford and which lenders might be open to offering you a home loan.
  • Get familiar with the housing market in the country—property prices change all the time, so make sure you are updated with the latest stats and facts.

2. Create a budget and stick to it

When creating a budget, you should always start with a rough estimation of your spending habits to have a more realistic picture of how much you can save. To do this you need to

Check on your credit score

If your credit score is good or great, you can redirect all your savings into the deposit for a new home. If it is less than stellar, you might need to think about giving it a boost before you apply for a mortgage. 

Take a look at your spending and see where you can cut back

Do you really need a gym membership? Can you get your caffeine fix at home instead of at your favourite coffee shop? Is it possible to cut down on nights out? These may seem like small expenses, but with takeaway coffee prices set to reach $7 (and more), you could make some serious savings if you simply cut down on everyday spending. 

Try to lower bills

There are some things you can do to lower your expenses even further

  • If you are paying more than the average electricity bills for your state or territory, try to reduce your energy consumption.
  • The average two-car household spends $16,912 on car running costs a year—if your bill is higher than that, use public transport or take up cycling.
  • Shop around for a better deal on your broadband or consider another internet provider.

Set a budget and stick to it

Ideally, you should spend half of your income on living expenses and 25% on savings (with 15% of those going towards your deposit). It can be hard, but if you want to move out of the rental home and into your own house, you will have to tighten the purse strings for some time. 

Of course, how much you put away also depends on how much you make. If you are an above-average earner, you can afford to save more money every month, but if you are struggling to make ends meet, you may not be able to put a quarter of your salary in savings.

3. Take control of your finances 

You can’t set a budget if you don’t know exactly how much you are spending. 

One way to manage payments is by setting up automatic transfers on your bank account for utility bills. This way they will be paid on time and you can keep track of how much you are spending each month.

Consider using round-ups

This is a feature offered by several banking apps that rounds up your purchases to the nearest dollar. The difference is then sent to your savings account. You won’t save more than 50 cents at a go, but every cent counts!

Consolidate your debt 

If you have outstanding credit card debt or other kinds of liabilities, you could consolidate them into one to free up more of your monthly budget.

4. Look into high-interest savings accounts

When it comes to saving accounts for a house deposit, you may want to consider a high-interest one. The recent rise in the cash rates will increase the interest rate on savings and term deposits, so right now is actually a good time to get a higher return on your savings. It’s also a good idea to put your deposit money in a dedicated account so you can keep track of how much interest you are earning each month.

5. Look into government assistance programs

Saving for a house while renting can be a lot easier if you have someone cover part of the deposit. Sometimes family members can help by gifting you money, but if this is an option for you, take a look at government schemes. There are several designed specifically to help first-time home buyers raise enough for a deposit, such as

  • The first home super saver (FHSS) scheme allows you to take out up to $30,000 from your superannuation account for the purchase of a new home.
  • The First Home Owner Grant (FHOG) scheme. Introduced in 2000, the terms of the program differ across states and territories, so you need to check the conditions that apply in your place of residence.
  • First Home Guarantee (FHBG). With this scheme, the National Housing Finance and Investment Corporation (NHFIC) will cover part of the eligible homebuyer’s deposit.

You should talk to a mortgage broker about whether you are eligible for one of these programs.

6. Lower your rent

Renting a house can take up the biggest share of your monthly expenses so lowering those costs can be quite helpful. Here are some possibilities to think about

  • If you’re renting solo, find a roommate
  • Check if you are overpaying on rent
  • Find a cheaper place
  • Talk to your landlord about lowering the rent

7. Find ways to earn more money

Take up some freelancing work or start a side gig to earn a little extra cash. If you don’t have the time, there are several ways you can earn money without doing actual work.

8. Set mini-goals

To stay motivated, set up mini-goals along the way. For example, you could aim to save $500 in the first month and $1,000 in the second month. If you’re finding it difficult to put aside a large amount of money each month, don’t worry – just start with what you can afford. Even $50 per week can add up over time!

Before You Start House Hunting

If you have the financial discipline and the budgeting skills to match, you could save a nice deposit in a few years’ time. 

But spending doesn’t stop here—you also need to factor in other house-buying costs, as well as mortgage repayments, ongoing expenses and maintenance costs. If you don’t think that your monthly budget can cover all the costs that come with being a homeowner, it might be better to save a bit more than what you would need for the deposit. 

1. Can you still save for a house while renting?

Yes, there are several things you can do to put money aside while renting a home, such as cutting down on monthly expenses and utility bills or putting your money in a dedicated savings account. You just need a lot of patience and discipline to stay within your planned budget. 

2. How much should you be saving while renting?

CommBank advises putting 20% of your income aside, however, try to aim for at least 25%, 15% of which should go towards your deposit. You will need the extra savings as there is more to buying a house than the deposit.

3. How long does it take to save for a house while renting?

It depends on where you live and if you are on a single or dual income. For instance, a couple can save up for a deposit much faster—in 8 out of the 14 jurisdictions covered in a 2022 report, couples saved enough for a deposit for a starter home in less than 30 months. 

Location is another important factor—WA residents can save for a 20% deposit on a home in 5 years on a single income, while it would take more than 20 years for someone in Sydney to do the same. 

4. Should you put all your savings into a house deposit?

No, as they say, you should never put all your eggs in one basket. You will have more expenses once you purchase the home—you will need to pay stamp duty on the property and conveyancing fees (a good conveyancer costs about $500 to $2,500). So when thinking of how to save for a home deposit while renting, don’t forget to factor in other house-buying costs as well.