When you take out a mortgage to buy your
first home, you will normally need a down payment as well. This is a lump sum
of money that you can put towards the price of your new home. It is important
to save this money as you will need it to show your lender that you are capable
of making regular payments as well as being prepared to contribute towards the
cost of the home. It can seem hard work though, saving up all of that money. If
you want an expensive property then you will have to save up even more and some
lenders will require more than others. Contributing more can benefit you as
well because it means that you will not have to borrow so much and therefore
will save money on the cost of the loan. However, knowing what to do in order
to save the money can be tricky.
at start of month
It can be a really good idea to save a chunk of
money each month just after you get paid. Setting up a direct debit to pay it
into a savings account can work really well. This is because most savers make a
mistake. They feel that the best way of saving is to put what is left at the
end of the month in their checking account into a savings account and save
that. Although this can work and you can still try this, you may spend more
this way. When you check your balance to see if you can afford things during
the month, you will see there is a good bit of money in the account and
therefore buy the item. If the money is already in a savings account then it
will not be available to spend and you will buy less and save more. You will
need to make sure that the amount you transfer is enough to get you saving at a
decent rate but not so much that you cannot cover the cost of your essentials.
Therefore, you will need to sit down with a bunch of bank statements and work
out how much you will be able to afford.
sure savings earn interest
You will need to put your money into a savings
account to keep it separate from the money that you use to pay for things.
Doing that will remind you that this money is not for spending. You will also
be able to earn some interest on that money while it is in a savings account.
It is a good idea to look around to find a savings account that pays good
interest. They can vary a fair bit and it is worth looking around as if you can
get more interest, then you will be able to get more ‘free’ money while you are
saving up. The interest will add to your down payment and will help it to grow
more quickly. You may find that a notice account or fixed rate account might
pay more interest but you may be tied in to save a certain amount for a certain
time or not able to make withdrawals. This may suit you if you are going to be
saving for a few years.
prices and cut spending
In order to free up more money so that you can save
more quickly, you need to consider whether you want to try to spend less.
Cutting back on non-essentials is a good way to start. Think hard about
everything that you are buying and decide whether you want the item or whether
you would rather put the money in your savings account so that you can buy your
home more quickly. Also compare prices on everything that you buy and make sure
that you are not paying more than necessary. You may not always want to buy the
cheapest items as they may not offer good value for money, but if you are
careful you may still be able to get good things without paying too much. Then
you will be able to use the money that you have saved to put in the savings
Earning more money may have a bigger impact than
reducing your spending or it could have a similar one. This is something which
may be difficult for some though depending on how easy it is for them to work
extra hours or to find a job that is better paid. However, it is worth having a
think about whether there are any other ways that you might be able to make
more money. It may be that you can take on a second job, sell things that you
own and no longer need or do some freelance work. It will depend on what
commitments you have outside of work and whether you are allowed to do other
work within your current employment contract. It is worth looking at money
making websites though as you may be able to find some ways to earn extra.