When you decide to buy a house through a home loan, you have to have enough saved for a home deposit to help you secure the loan you want. The deposit will be determined by the amount of the loan you want to get, and it’s normally at least 5 percent of the loan. However, when you cannot put up at least 20 percent of the recommended amount, you may have to pay additional fees in mortgage insurance.
The following are some tips on how you can start to save for your home deposit:
- A second income: It is now easier to make money outside of your main job. The internet is the best place to get side gigs, and there are countless options, including working as a photographer, developer, copywriter, graphic designer or blogger. You can advertise your skills so that you can be hired. You can also look into Uber or Airbnb. This can help you turn your car or your residence into a money-making opportunity. You may also go the old fashioned way of making some money on the side, like a dog walking service, car washing service, baby sitting, cleaning or gardening. You can also get a simple job at a café or a shop on the weekends. Other gigs you can get are party entertainment, fitness instructing, mystery shopping, survey taking and data entry.
- Move back with the parents: If you are still young, you may think about the possibility of moving back with your parents while saving money. You will be able to save on bills and rent while living with the parents, and it will be easy to continue saving using other methods.
- Do not live too glamorously: You should cut down on the things that you spend money on that are not that necessary. You can cut down on the morning coffee, going out too much, and paying for TV subscriptions. It is up to you to figure out what is important and consider how much you would like to own your own house. Coming up with the financial goals may be difficult, but you can find a way of coming up with a budget and sticking to it.
- Save more at the start: You can save up to 30 percent of your paycheck in an account like a savings account. If you are able to, you may want to add up to 20 percent of your earnings every week or every other week. Even if it is only 5 percent, it will eventually add up.
- Sell the valuables: If there are valuable items you are willing to part with, you may think about selling off some of them. Depending on what you own and how much you want to sell, you may be able to increase your savings
- Maximize everything you have: Even though it is important for you to increase your savings, it is also important for you to make sure that you are saving in the right place. You should consider a savings account that will offer a high interest rate with little or no fees. This is to ensure that you maximize the benefits of saving.
- Deal with debt: If you have too much debt, you will not be able to save. This is why it is better to minimize your debts so that you can save more. If you have too much debt, you should consolidate it so that you can save on the fees and interest. In case you are not able to roll all of your debts into one, you should start paying off the debts that have higher interest and continue from there.
- Go for bargains: If you decide to go grocery shopping, you should buy cheap options if you normally buy the name brand products. You should buy items in bulk whenever you can and not go for luxury products. You should stick to the basics only and start to save from here.
- Stop using the credit card: A credit card can be a thorn in the side when you are trying to save. They do encourage you to save more, but when you do not pay in time, you will start to pay high interest. If you are not able to get rid of the credit cards, ensure that you pay them when it is still early. This ensures that you will not be paying extra because of the interest.
Start saving for your home deposit by following these 11 tips
- Have a monthly budget: It is easy to build your savings through spending less than what you are earning. Your financial goals will start and end with the monthly budget. You have to be honest and also realistic about the spending habits you have. You should stick to the budget whenever it is possible. You can use automatic payments to manage your bills. You should print out your budget and follow it carefully. However, you have to ensure that you have paid everything so that there are no extra fees to pay for late bills.
- Keep the money you save aside: People can have trouble when it comes to saving since they see money in the bank and they think that they are saving enough and can spend some. In order to achieve the right saving habits, it is good to keep the saved money in its own housing fund and make sure that you do not spend it.
- Save automatically: After establishing a dedicated savings account, ensure that there is a direct deposit that goes there each payday, and the balance will be sent to the checking account. When you save money on a regular basis, you will not be tempted to use the money and put the savings off to a later time. This will help you to save first, and then you can use what is left instead of saving what is left over after your spending.
- Save all your extras: When you get a tax refund or a year-end bonus, you may want to spend it all. However, if you are building up the down payment, it is better to practice restraint. This will be applied to the day to day expenses and the one-time cash. If you have a budget in place, there is no need for you to use that money, and it should go into savings.
- Save on large purchases: It is possible for you to save money through eating out less or not buying branded items; however, you should also learn how you can cut your biggest expenses. You should skip the annual beach vacation or wait a little before you buy a new car. When you stop saving only pennies and save in a big way, it will help you to save faster and reach your goal.
- Downsize your house before you can upsize: When you move into a one bedroom apartment instead of living in a two bedroom apartment, you will be able to save up to 30 percent of the money you are spending on housing. In case you have children, it could be a good idea to move into a smaller space so that you can get into your new home faster. The unused rent may be relocated into the housing fund. There is an added bonus since you will also be spending less on heating bills and cooling the house.
- Work even more: While saving, it is better to start bringing more money into the home. If you can get overtime on your job, you should take such an opportunity. You may also want to get a job on the side.
- Do not save too much towards your retirement fund: In case you are saving in a 401K, it can be a good idea to save the amount where you can get the employer sponsored contribution. This is normally 6 percent. When you are saving towards your house, it is good if you can stop here. Instead of worrying about paying more towards the housing, keep in mind that your house will also be an asset. Having a house is a retirement saving in itself. You can also withdrawal money from the retirement fund to go towards your house payment without having to pay any penalties.
- Ask for help: Saving and keeping to the budget is like going on a diet. It is easy to start, but it is not easy to stay on track. You should let your friends and family know what you are doing so that they can offer help instead of inviting you to go out every weekend shopping.
- Do not try to punish yourself: Saving for a house may be straightforward in theory; however, there are emotions that are involved in it. If it feels frustrating or painful to save, then it is not easy to succeed with it. If you miss eating out, you can start to cook yourself the food you like once a while. It is easy to be happy while saving if you can also find a way of enjoying yourself while doing it.
- Downgrade the car: You may sell an expensive car so that you can buy a smaller one or you may stop using a car and choose to use public transport instead. This will increase the savings that you will need to save for the house.