People are having more trouble purchasing homes than ever before. One recent survey found that 41% of perspective home buyers struggle to find a home that meets their needs and around 50% are having trouble finding one within their budget.
Your goal of becoming a homeowner will be much more attainable if you save a large enough deposit. This will help you qualify for a loan that won’t be too expensive to pay off over time. Fortunately, there are a number of steps that you can take to increase your deposit work quickly.
Here are some tips that will make it a lot easier. You can find more tips from Qapital.
Set a goal of reaching a 20% deposit
The first step is to set a savings goal. You need to decide how much of a deposit that you want to come up with.
You should strive to save at least a 20% deposit. Why is it a good idea to save 20%, when you can qualify for a mortgage for a lot less? The reason is that you won’t have to pay private mortgage insurance (PMI) if you have a deposit of at least 20%. This will reduce your future payments considerably.
Avoid holidays for the next year
You are going to have to make sacrifices to save money for your first home. One of the toughest trade-offs is that you might not be able to take a holiday for a while.
This is a worthwhile sacrifice if you intend to save for a deposit. How much of a difference can not taking a holiday make? You will see that the average cost of a holiday is £908 per person. If you and your spouse are planning on purchasing a house and don’t have any children, then that means for going a holiday will save you almost £1823. The average deposit on a home is around £20610. This means that you can save roughly 10% of the deposit on an average priced home by just not taking a holiday this year.
Prioritise paying off high interest debts
Even high earning individuals can make the mistake of taking on too much revolving debt. Credit cards are a prime example of debts that people of all incomes take on.
These kinds of debts can seriously get in the way of your ability to save for a down payment. If you have a way to come up with the money to pay off your credit card balances, then you should do so. Even if your only option is to take a penalty by borrowing from your retirement account, then you should probably bite the bullet and do it. The penalty pales in comparison to the cost of interest on your outstanding debt.
The interest and minimum monthly payments that you would have to make can be saved for your down payment instead. If you have a credit card balance of £5,000, then your annual interest will probably exceed £700 and your minimum payments are probably at least £300. You’ll have several hundred pounds more a month to pay towards your down payment if you come up with a way to cover this debt.
Cut back on unnecessary expenditures
Cutting back on unnecessary expenditures could seem like easiest or hardest way to save for a deposit on a house. It is all a matter of perspective.
You need to take a hard look at your monthly expenses. You’re probably going to realise that you are making some regular purchases that you could do without. This is going to take a change in your attitude to make some lifestyle adjustments. However, you could make a real difference.
One woman noticed that she was spending £10 a day at Starbucks for herself and her husband. This translated to over £3650 a year. That is around 20% of the cost of saving for a down payment on a home. If you combine the savings with the savings from not taking a vacation, they were able to save 30% of the cost of their deposit!
Reaching your deposit call is completely realistic
You don’t want to be discouraged about trying to buy a home. Understandably, you might get frustrated about saving for a deposit. This is the single hardest part of the process. Fortunately, there are a number of things that you can do to make it a reality. You just need to look at ways to save and increase your income until it is possible.