A mortgage is a strange thing – there are so many hoops to jump through, when the reality is that in most cases, you’re already paying rent each month that’s around the same cost as a mortgage repayment would be, and sometimes even more. However, banks and other lenders do have to be completely sure that you’ll be able to pay the loan back, which is why there are so many checks and balances involved – including the need for a down payment.
It’s this down payment, which could be anywhere between five and 20 percent of the value of the property (and sometimes more, depending on the lender and the loan), and trying to save for that isn’t an easy thing to do, especially if you’re paying rent and other bills. So what are the options? Well, the good news is that it can be done, so if a down payment is all that’s stopping you from becoming a homeowner, read on to find out how to save.
Don’t Save
This might seem like a strange thing to say, but it might not be necessary to save for a down payment at all, depending on what programs might be available in your area, and whether you’re eligible to take part.
A good example of the California Dream For All program, which helps people get on the property ladder by lending the applicant the money for their down payment, which would then need to be paid back when they sell the house in the future. Take a look at the Dream For All benefits to see if you qualify, as it could be the ideal way to get started with buying your own home. Even if this program doesn’t suit you, there are others, so it’s definitely worth speaking to an expert about what might be available to you before you start saving or you assume you’ll never own a home.
Reduce Your Debt
One of the problems that can often get in the way of saving for a down payment is debt – it’s an expensive way to live, and it can take a lot of your income if you’ve not been careful in the past. Not only does that mean you don’t have as much money to put into a savings account as you would do (all your spare money is being used to satisfy the debt), but mortgage lenders will think twice about lending if you have a lot of debt, as they won’t want to run the risk of overburdening you and losing their money.
That’s why, when you’re ready to save for a down payment, you need to reduce your debt first. Any spare money you get, put towards the debt, and it’s also a good idea to cut back on your spending as much as you can, using any money you would have spent on subscriptions, meals out, activities, and so on on your repayments instead. It’s a sacrifice, but it’s only for the short term, and if it means you don’t have any debt to worry about and can save for a house, it’s definitely worth doing.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)
