6 Ways You Can Save Money For A Down Payment
Having an own home is a dream of many. It is often considered as a sign of stability. Buying a home requires significant planning and effort. The first step in the process is to plan your finances taking all the costs of buying a home into consideration. This will help you from overstretching your budget. One of the important aspects when planning your finances is creating a fund for down payment and paying taxes. Typically, down payment amounts to 20% of the total cost of the property. The rest can be financed with a home loan. Let’s look at factors that will help you save money and pay for the down payment.
• Make a proper budget
It is always a good habit to make a budget. A budget includes all the cash inflow (incomes) and cash outflows (expenditure) on a weekly, monthly or annual basis. A budget helps to know how much cash balance is there at the end of the period. Thus, preparing and maintaining a budget will help you determine the amount you have to pay for the down payment.
• Grow your savings
Be disciplined about saving by setting yourself a goal. Look at making investments in financial products like shares, mutual funds, fixed deposits etc as per your risk appetite. Systematic and consistent savings will help you build a kitty for your down payment.
• Cut short unwanted expenditures
It’s a good idea to cut down on expenses that are not critical. Being able to distinguish between wants and needs, coupled with prudent spending habits will go a long way in helping you save money.
• Earn money with a side hustle
One of the ways in which you can look at adding to your funds is by creating avenues for additional income - it could be through side hustle over the weekend by doing something you like, generating income from hobby or even dabbling in stock market if you understand the risk involved and have sound understanding of the market.
• Reduce your debt
If you have less debt, it helps you get a loan easily. Lenders look at your debt to income ratio before lending you money. A higher credit score will also get you a better rate of interest and higher loan amount eligibility. Check your credit cards, education loan, personal loans or any other loans and chalk out a plan in order to reduce your dues. If you are able to identify an additional source of income, then you can use the extra income to pay off your debt.
• Automate savings
If you are having a hard time managing your money or you find it hard to save, its time for you to automate your savings. Firstly, set an amount you want to save every month. Set up an automatic withdrawal from your bank to a separate bank account every month. It will help you save a particular amount every month and help you pay for the down payment of your house. You can even look at short term deposits with financial institutions.
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