Whenever you buy a property, you’ll need to save up for a downpayment. You can think of this money as your contribution to the new house once you max out the amount that you can borrow from the bank.
For most first time transactions, you’ll need to put down around 20 percent of the value of the home in order to qualify for a mortgage. So, if the property you want to buy is on the market for $200,000, you’ll need to have $40,000 in cash for the deposit, plus some extra savings for other fees – around $55,000 in total.
You might think that saving for a property down payment is a challenge – and it can be. But in this post, we show you how you can do it with relative ease. Check out our ideas below.
Pick A Timeframe
The first step is to decide when you want to buy your first home.
Let’s say that your total down payment is $40,000, as in the example above. You can use that figure to work out how much you need to save each year. If you have no money in savings right now and need to start from scratch, you’ll need to save $40,000 over the next twelve months to buy the property you want within a year. If you want to do it in five years, then you’ll need to save $8,000 per month and so on.
Once you have a time frame, you then have a good idea for how much money you’ll need to accumulate and by when. You can cross check your savings goals with your monthly budget to see whether it is feasible or not.
Look For Clever Ways To Save
Just putting money aside in your checking account is okay short-term. But if you are saving over the long-term, you’ll want to find a way to get a return on the money you save so that you can build your capital faster.
Look into investing in assets that provide a return. Real estate, mutual funds, equities and bonds are all good options. Always speak to a qualified financial advisor before making any decisions on how to use your money.
Automate Your Savings
Here’s another tip that really works when you’re trying to save a large amount of money: automate your savings.
Saving manually is challenging. That’s because there is usually something that you want but probably can’t afford. However, when you automate your savings, you subtract them from your account immediately, so you never miss the money.
It’s all very psychological, but it works for a lot of people. If they take money out of their account the moment they get paid, then they are much more likely to save.
Save Your Windfall Payments
If you’re lucky, you’ll sometimes receive windfall payments. These include tax refunds, sales of personal assets, and even gifts. If anyone gives you any money, then immediately invest it and allow it to grow so that you get closer to your financial goals.