Saving Tips: 8 Steps to Start Saving for Your First Home
Being a homeowner and owning a property of your own is everyone’s dream. Latch onto these tips to help you jump-start your savings to buy the home of your dreams.
Being a homeowner and owning a property of your own is everyone’s dream. With the rising property prices that happen mostly every year, saving money for a home might seem impossible and can feel overwhelming especially if you are earning an average salary. Saving money for a home takes time, but you can make it as easy as a pie in the smartest way possible. Latch onto these tips to help you jump-start your savings to buy the home of your dreams.
1. Set your budget, break down the cost
Before you decide to get loans from multiple lenders, it is important to build a budget to save for a down payment. Because, once you have made a budget for a down payment goal, you will know how much you need to save.
Setting your down payment budget means you know which home you can afford. If you are looking for a more inexpensive housing market, take a look at homes in a city with lower living expenses or moderately priced neighbourhoods. You can do this with the help of your real estate agent. Then, talk to some lenders about their home loan or mortgage so you will know how much monthly payment that you need to pay off. Do not purchase a home more than you can afford.
However, when you are buying your home, you might be a little bit unsure about the two terms between a home loan and a mortgage loan. Although home loans and mortgages walk side by side and look similar, they are not the same.
Home loan Vs. mortgage loan, what’s the difference?
A “home loan” is a sum of money borrowed from a financial company to purchase residential properties. Home loan has a lower interest rate compared to mortgage loans. Meanwhile, the loan repayment period begins only after the loan provider has shell out the whole home loan amount, and the tenure of a home loan can last up to 30 years based on your financial condition. There are several types of home loans that are in the market that have adjustable or fixed interest rates.
While a mortgage loan has no restrictions on how the loan is used but mortgage loan interest rates are higher than a home loan.
2. Do your research on loans
With several types of mortgage loans or home loans that exist on the market, you need to get the right type of mortgage for you. Lenders offer various mortgage loan options based on the type of interest or even purposes. The thing that you must consider is your ability to pay the mortgage installments on a later day. Take note that you should not spend more than 30% of your income on your mortgage.
You might also want to consider choosing a 15-year fixed mortgage rate if it suits your affordability level. Yes, you will have a higher monthly payment with a 15-year loan instead of a 30-year loan, but a 15-year mortgage carries a lower interest rate, while a 30-year mortgage would have a higher interest rate over the life of the loan.
If you need further assistance for your mortgage loan, hiring a mortgage broker is a good idea. Mortgage brokers will help you as a “borrower” to connect with lenders and seek out the best fit in terms of your financial circumstances and interest-rate needs.
3. Pay down debt
When it comes to building up savings, it can be frustrating when we have to pay down our debt that goes mainly on credit cards. Because the struggle with paying credit card debts seems to be unending especially with the high-interest rates you need to pay every month.
To pay down your debt, there are some strategies that you can use and it starts with knowing what you owe. By having a clue on what you owe every month, you will have a number of the amount of debt for you to focus on—make a list of your spendings, including the balance and the interest rate.
4. Look for the best high-interest savings account
If you are planning to buy a house, a good way to build and store your money is in your savings account. Regular savings accounts usually offer a low-interest rate, but there are few banks that offer a high-interest rate on their savings accounts. So in this case, if you want to earn on your term deposits, you might want to consider looking for a bank with a high-interest savings account.
5. Know how much you should pay for a house deposit
Before you know how much you should pay for a deposit, you need to start planning your house deposit.
To give you a clear picture, the bigger the deposit that you pay could increase the likelihood of your home loan application being approved. Because a bigger deposit means that you are not going to borrow as much money compared to if you are paying a smaller deposit. This being said, it means that you are paying off your loan sooner. Again, it all comes back to you, whether or not to debt larger deposits.
6. Split up savings accounts
Having a separate bank account for different purposes will help you reach your financial goals more easily. Splitting up savings based on your objectives and goals allows you to have a clear visual on the more important matter, not to forget having separate savings accounts for your emergency fund to protect you from unexpected expenses.
7. Cut down monthly expenses
Lower your spendings. Lowering your expenses is a must when you want to pay down debt and build your savings. If you need to make a monthly budget for your spending, then be it. It’s not only necessary to make a budget for a home, but also your spendings and expenses. Once you have made your budget, it is time to cut back some unnecessary spendings. Allocate your credit card interest rates to your bank account instead.
Limit online shopping, cut back on unnecessary expenses, and you might even try replacing your regular light bulbs with more energy-saving ones. There are ways to cut down your living expenses, and the easiest might start from tracking down your monthly expenses.
The fundamental thing you need to do to reduce your monthly expenses is to buy less and spend less, buy what you need and not what you want. It can be hard but if you are consistent and true to your goal, you will thank yourself later on!
8. Get some extra work
Working more than one job will definitely help you boost your income, especially if it is possible for you to take some extra hustle by having a side-job or a part-time job. The job does not have to be entirely new, it can even be a small task like freelancing, to an online-taxi driver. There are plenty of options out there that you can choose from.