Saving money for a down payment on a home takes time, effort and patience. However, having a large down payment can save you thousands of dollar over time because you will carry a smaller mortgage. In addition, having a large down payment will prevent you from paying mortgage insurance premiums, which is an added expense that gets amortized into the cost of the mortgage.
Here are five ways to save for a down payment:
1. Set a Goal
You need to find out the minimum down payment for the house or condo you are looking at. Although many mortgages allow smaller down payment as low as 5%, plan for a 10% or 20% down payment. On an average, if you are targeting a mortgage of $300,000, 20% down payment will be $60,000. So, you know that you need to save at least $5,000 every month to raise money for your down payment in one year.
2. Sell Items You Don’t Need
This is a crucial moment that you need to raise money through every legal means possible. If you have clothing, electronics, computers, phones, and other items you are not using, sell them off and save towards buying your dream home.
3. Buy Necessities Not Luxuries
Cut down your expenses on luxury items such as the cable, Netflix, Internet, and stick to basic items you need. You can downgrade your mobile phone subscription to a more affordable plan. Cancel expenses for all services you can live without and save towards your goal. Whenever you feel like buying an item, ask yourself if you can live without it; if you can do without it, don’t buy it.
4. Move in With Family or Friends
As part of efforts to save money by all possible means, move out of your current home and move in with your family and friends; at most, you will share the rent with them, and you can save the remaining amount towards your down payment.
5. Get Extra Jobs
Boost your income and savings by getting part-time jobs that will not clash with your main job. Find any part-time job in your neighborhood or tell friends that you are searching for a part-time job. Find out what you love doing and turn it into money. Every extra cash you generate is not to be squandered, save it in your special savings account and watch the money grow.
At the end of 12 months, you must have saved at least the amount you need to make a down payment not minding the inconveniences. You have to sacrifice for bigger results.
Buying a home is exciting and brings a lot of changes to your life and lifestyle. Why throw away rent when you could be investing in your own place? AWealth, a financial advisor focused on financial planning can help you through the processes such as applying for a new mortgage for your new home.