If you’re dreaming of becoming a homeowner, you know you need to save. Being able to put down a sizable downpayment can actually save you money in the long term and help you to secure a better loan. How can you save in a smarter way? Make your hard earned money go further with these tips.
Set a goal
It’s easy to get lofty ideas of how much you want to save, but realism is critical. Spend time working out how much you can reasonably afford to save. Remember, there are plenty of other costs involved with buying a property too, such as legal fees and property taxes. Factor everything into your estimate.
You can typically get a better deal on your mortgage loan the more you are able to put down. Many people aim for 10 or 20%, although this can vary depending on other factors like your credit rating. Book an appointment with a mortgage advisor to find out how much you should plan to save.
No matter your salary, you’ll find it hard to save such enormous amounts without a proper budget. As well as your salary and other income, you should weigh up your regular monthly expenses, like your current rent payments and the cost of running a car. You should also be saving for a rainy day while building up your down payment. You never know when you’ll need to pay a large amount of money unexpectedly, for example, a medical bill or a trip to the mechanics. Have a rainy-day fund that you can fall back on, so an unexpected bill doesn’t leave you back at square one. Check out some of the best tools and apps to help you budget effectively.
Find the way that works for you
Not everyone saves in the same way. You might be hoping to buy soon, in which case you’ll be saving the most money in the shortest timeframe possible. Others will be working with a longer timeframe, which means they can budget differently.
No matter your goals, open up a savings account as soon as possible. Choose the one with the best interest rate, but don’t go for options that tie your money up for years if you’re likely to need it sooner. Risky investments might seem like they offer a higher return, but they are, of course, risky! You don’t want to lose all of your hard-saved money, so sticking to a regular savings account might be best. Set up automated payments into your savings account every payday to make sure you’re reaching that target. It’s easy to overspend and undersave otherwise.
Once you’ve got a down payment lined up, it’s time to get home loan pre-approval. You can start searching for your dream property once you know the size of the loan you could secure. All your hard work and saving starts to pay-off from here – and eventually, you’ll have the keys to that home you’ve been dreaming of. If you find that you’re unable to secure a loan, this might not be the end of the road, so explore your other options too.