Friday, July 5, 2019

Three Smart Ways to Save For Your First Home

If you’re scrimping and saving for your first home, it can feel like you’re getting
nowhere. But if you have a plan of action, seeing your savings clock up will keep
you motivated. These tips will help you put in place effective strategies to help
you reach that goal in a workable timeframe. 

Photo by from Pexels

Work Out a Realistic Budget

Before you even start viewing properties, it’s crucial to set out the amount of money
you can realistically afford. Nobody knows your finances as well as you, so don’t
put the responsibility for deciding on your budget onto the bank or your broker. Be
prepared for the bank to offer to lend you more money than you can comfortably
manage month by month. When you’re sitting down to do your sums, remember:
a mortgage is only one part of what you will owe every month. Don't forget to add
your home insurance premiums (which are likely to be a lot more than your contents
insurance if you are currently renting) as well as your council tax, property tax,
estate agent and broker fees… the list goes on. 

Kill Your Debts

The golden rule when it comes to both renting and buying a home is that the total
cost of your housing should stay below one-third of your total income, whether you’re
an individual or a family. But even if your housing costs are kept in check, other debts
like student loans, car leases and credit card debt can sap your remaining income,
leaving you short on cash for other essential expenses. Debt effectively lowers your
income, which should indicate that you need to reduce your spend on housing. This
is not the news you want to hear if you’ve found your dream house and land, and are
saving frantically to buy it. The sooner you zap those debts, the sooner you can up
your budget and secure the home of your dreams. And if you’re wondering why you
would bother paying off debts while you’re trying to save money, remember the
interest fees you’ll be saving once you’re debt-free. 

Calculate Your Required Deposit

Before you have your heart set on a home, save yourself the disappointment of not
being able to afford it by making sure you’ve settled your budget and worked out
how much you need to save for your deposit. Mortgage calculators online can give
you a good sense of what you’ll need to save. A down-payment or deposit in the
region of 20% is standard if you want to skip having to shell out for mortgage insurance,
which is another easy way to lump extra fees on top of your monthly repayments.
That said, if your credit score is through the roof, you may be eligible for a deposit,
as low as 10% without having to go the private insurance route. 

If you’re testing the waters of the real estate market, saving for your first home can
be a harrowing experience. But with a few solid practices in place, you might find
that your supercharged saving efforts are bringing your dream of owning your own
home closer by the day.

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