Tips to Help Save for a Down Payment on a House
On the face of it, saving for a down payment for a house may seem like an impossible task. You look at your budget and just can’t see a way of sparing the extra cash.
However, sometimes it’s how you balance your budget, rather than how much you have in your monthly budget that matters. There are a number of saving methods you can use, with some clever adjustments to your budget that will allow you to save for a down payment without over burdening you financially. You will, of course, need to make some sacrifices.
Balance Your Budget
If you look at your budget and can’t see a way of freeing up extra cash, you are likely not looking hard enough. Remember, you can purchase the same items and services at more competitive prices, so shop around for ways to get cheaper deals. Instead of buying expensive brand names, look for cheaper alternatives. It’s a small sacrifice to make when you consider the end result is you being able to afford your dream home. You can also increase your surplus cash by cutting out luxury purchases. You don’t have to do without every month. In fact, you are more likely to stick to your savings plan if you allow yourself an occasional treat.
When it comes to saving, the saying “Out of sight, out of mind” has an important part to play. Trying to save money in a single account is not only difficult to manage, but comes with the added temptation of dipping into your savings. By opening a savings account, you can set up direct transfers or instantly transfer any surplus cash you have to spare into your down payment fund. You will have the ability to watch your savings grow, as well as being able to calculate how many more payments you will need to make into the account in order to reach your goal.
Save on Interest Rates
Your credit cards, loans, insurance and car payments are all potentially untapped savings. Check out the conditions of your loans, contact the lenders, and see if you can negotiate a better deal. Credit card lenders, especially, will often agree to lower rates for customers who have consistently met or exceeded repayments. Car loans, however, require a little more caution. Before changing your payment habits, check that you won’t end up getting penalized due to complicated “sum-of-the-digits” interest calculations.
Know Your Credit Score
It does no good to assume that your credit is good based on the fact that you have never missed a payment. If you do not regularly check your credit score, you run the risk of missing errors that were not caused by you. No system is infallible, so there is a chance that there are defaults showing on your credit record that you are not even aware of. If you do not get these errors corrected, it will affect your ability to secure loans and other finance, or result in you paying higher interest rates than you would have otherwise. That extra money could go to your down payment savings, allowing you to reach your target amount in a significantly shorter time frame.
Save Extra Money
It is tempting to blow extra money on treating yourself or taking an expensive holiday. However, if you receive a bonus or your tax refund is higher than you expected, seriously consider investing that money into your down payment fund. When you are sitting in the comfort of your new home, you will be glad that you made the sacrifice. If you have two cars, you might also want to consider selling one in order to generate the extra cash that you need. When you are doing a spring cleanup, you have another opportunity to generate extra savings by holding a yard sale. As a general rule, always be on the lookout for ways that you can save money. Set yourself goals so you can see the progression towards your target. Know that you are achieving something of worth. No matter what, do not deviate from the plan. Occasionally have another look at your budget, make any necessary changes to your spending habits.
Loans & Borrowing Options
You should also look at the kinds of loans available to you. Provided the conditions of the loan are not going to stretch your budget, this option is often the fastest way to get to your target. You can also ask family members to help you out, which will allow you to reduce the amount of interest on repayments. Speak to a representative at your bank, as they can also offer helpful advice on how to best save towards a down payment, based on your personal finances.
If you have any questions about the best practices to saving for a down payment on a house, talk to one of our lending experts at Galaxy Lending Group. We will inform you on all of the options that you have. Call us today 602.595.1233!