Everyone wants to get ahead, get in their own home and stop paying off someone else’s mortgage. But the reality is, as we push through the bills, spend a little on our social lives, the kids, and the rent, there is not much hope in terms of saving enough for a down payment.
Down Payments are there for a reason, to ensure that you have some of the principal & interest paid off on your property before you take possession. It also is proof to the bank that you can, in fact, save money and that you have a history of paying things on time.
Sometimes, there are 0 deposits required, however, these will leave you really exposed should there be another GFC like back in 2008, and often have higher interest rates and more fees in the fine print. So let’s look at 5 key ways you can save your home down payment sooner.
1. Set your goal.
You can’t get anywhere without a plan. Understand how much your mortgage is to get your home – be realistic too – then set goals and work to them. For example, you want $20,000 in 2 years, so that is $192.30 per week you need to put in a savings account – ideally that you can’t take money from easily, or not attached to your online banking or everyday accounts.
2. Decide what expenditures to eliminate.
Start cutting. We all have expenses we don’t need, some of us as simply careless with our money and don’t know where it all goes. So write out a budget, ensure that you leave enough for everything, including the new weekly/monthly amount that is put into your home savings account. This may mean changing the grocery store you shop, eating out only once a week or fortnight or maybe not shopping for new clothes so much, but in the end, you will be the one laughing all the way to the bank.
3. Open a separate savings account
There are bank accounts, there are high-interest savings accounts. Although the interest rates at the moment are at an all-time low, that will change. If you just put your money in a transaction account, not only do you have access to it, but you get little to no interest. However, if you put it in a high-interest savings account, not only is it harder to get to – as it can take 1-2 days to clear into your account, thus removing the ‘impulse spend’ – but you will get interest on the money that is there. That is all adding up in the long run!
4. Save your tax refund.
Ok, so we all know how exciting it is when we get our tax refund…lets hit the slopes for a week or let’s go shopping. No, now is not the time. It is time to put that somewhere better. That may be paying down a debt, such as a credit card, thus reducing your monthly bills and allowing you to put more into your home savings account. Or, just put it all, like a band-aid, straight back into the Down Payment savings account, so you don’t see it again – until you are buying your home.
5. Move back home.
Yep, as much as you may not want to, this is one of the way – especially the millennials amongst us – if you have been living out of home, living it up you may not have a massive amount of money in the bank saved up for your home. The fact is, living at home with your parents will cost you a lot less. Contribute some cash towards rent, food and don’t be a pain to them, as this could be your fast track to getting your own home sooner.