Saving for a house? Here’s how to do it
Have you been dreaming of owning your own home? You’re not alone. Most young people want to own their own homes, however many millennials have accepted the fact that they’re unlikely to be able to afford their own home.
Here’s the thing, saving for a house can be done. And while it won’t be easy, by making a few changes and setting some big goals, you can own your own home and get onto the property ladder.
Even if you’re not planning to buy for a few years, you’ll need to begin thinking about your down payment. Unlike when you save for retirement, this is a large sum of money that will also need to be accessed soon.
Here’s how to save for a house:
Determine how much you’ll need
You’ll usually need to sit down with a mortgage lender who can tell you how much you would be able to borrow for a mortgage. The guidelines say that your housing expense shouldn’t be more than 28% of your monthly income.
So if you’re making $5000 a month, the most you’ll be able to pay towards your house each month is $1400.
You’ll also need your downpayment, which should be at least 20% if you’re hoping to get a good deal with a good mortgage rate.
Assuming you took out a mortgage of $177,500 with a 20% downpayment, you’d need around $45,000 ready to go.
Work out your timeframe
If you want to buy a house within 5 years, you’ll need to save $9,000 each year. The shorter the timeframe, the more you’ll need to save each year. Want to slash it to 2.5 years? You’ll need to save $18,000 a year, or $1500 a month.
Slash your expenses
Now that you know how much you’ll need to save, you’ll need to be realistic about where that money is going to come from. You may need to sacrifice some nights out with friends, but if you let them know about your goal, they should understand and help you socialise without spending much money.
You’ll need to say goodbye to nights out at the bars or at the casinos. Instead, arrange to have drinks at your friends or have them come over instead. And if you love gambling, websites like FUN88 and M88 could be a great way to help you save- as long as you gamble responsibly and put your winnings in your house fund.
Now is the time to call your providers and see if you can get a better deal. This includes your power company, phone company, internet company, and more. Explain that you can’t afford to pay what you’ve been paying anymore, and you’d like to know your options.
Often, they’ll be able to give you a better deal, or you can find a cheaper provider by looking into your options.