Purchasing a home is one of the most expensive things you’ll ever buy in your life. The down payment, for instance, is usually 20 per cent of the price of the property. Saving money, therefore, is an important step if you want to have a home that you can call your own.
Setting aside money for a down payment to buy a home from a house and land package provider, such as Ashbury Armstrong Creek, is not impossible. With a little planning and a lot of financial discipline, you can accomplish this seemingly herculean financial milestone.
Here’s how you can effectively set aside money for a home deposit:
Take a Good Look at Your Budget
Understanding how your budget works will help you set a realistic down payment savings goal. When checking your budget, figure out where your money is going and find out how much you have left once you’ve eliminated key living expenses.
Look at the Prices of the Properties
The property market in the country is always changing. If you’re looking to purchase a home, you need to check out the property prices in your preferred area. A few of things you can do include perusing your local newspaper’s property section, attending an auction and visiting online real estate websites. Doing your homework allows you to determine whether the dream home you want to purchase is within (or out of) your reach.
Discover Your Loan-to-Value Ratio
Not sure how much money you should save? Figure out your loan-to-value ratio. Do this by dividing the home loan amount by the property’s appraised value or purchase price. The LVR is important, as lenders use this figure to measure how risky it would be for them to provide you with a home loan.
The general rule is to keep your LVR as low as possible. A high LVR (over 80 per cent) has various disadvantages, including a higher interest rate and the need to pay lender’s mortgage insurance (LMI).
Move Back into Your Family Home Temporarily
While this idea might not seem appealing, some young individuals do this while they are in the process of saving for a home deposit. Moving back allows you to eliminate rent, which likely represents a large chunk of your expenses. Getting rid of rent lets you boost your savings quickly.
Look for a Savings Account that Offers a High-Interest Rate
On top of finding ways to boost your income, you need to make the money you’ve saved up work for you. Simply depositing your hard-earned money on an everyday transaction account will less interest. Additionally, you’ll likely be tempted to use that cash to satisfy your wants.
What you can do in this case is to transfer your funds to an account that provides you with a high-interest rate. Shop around financial institutions that offer this product. Some banks, in fact, give you bonus interest if you do not perform a withdrawal transaction. With this program in place, you’ll be less inclined to touch your bank account unless you need to pay off an urgent and unforeseen expense.
These are just a few ways to save up for a home deposit. If you continue to save money religiously and decrease spending on non-essentials, you’ll see your down payment grow faster and hit your goal in no time.