Reach that 20% target so you don’t have to take out private mortgage insurance.
It is the ideal scenario to capture enough of your income for a down payment that stacks up to at least a fifth of your new home. It takes a lot of commitment and sacrifices. We’ve selected methods of cutting back or stretching your money so that you can live life now and propel yourself onto the property ladder.
Here are three options I would recommend considering in order to reduce your living costs and start flooding your savings account to get your down payment sorted.
- Extra tenant
If you are already in the rental market and there’s a room that could be converted for an extra tenant, then do it! Although you may not want an extra tenant to be pottering around your home keep your end goal in sight. Sacrificing a little space in your temporary home is lot better than stalling your house funds. It’s a matter of short term pain and long term gain.
- Move back home
Many renters dismiss this off the bat. However, it is not an easy task to save such a significant amount without a little help. If you come from a close knit family who won’t mind a few months of you moving back into your bedroom then I’d have to seriously question your resistance. Obviously this solution will not work if there are hundreds of miles separating you and your parents and in that case…
- Home Share
There are elderly people in every town and city that suffer from loneliness and isolation. In order to combat this social problem people looking for cheap or sometimes free rent are matched with an elderly person. In return, they’ll get a companion and the security of living with another person in case anything happens; such as an injury. Usually you’ll just have to help with the utilities and, of course, do your fair share of housework. However, you will not be expected to be a career, simply a friend to your housemate. This system works beautifully as you will deposit savings into your account at a much faster rate. The other bonus to this is that you can feel good by helping a fellow citizen feel safe in their own home and keep them from having to go into a nursing home.
- High interest online savings account
Don’t open a savings account in the same bank as your checking account just because it’s convenient. I’d be more inclined to skip the traditional banking route altogether and instead opt for a high interest online savings account. The return is not akin to that of investment accounts but I don’t think the gamble is worth it for most people. This clever step needs just a little research but can get you trundling a little quicker towards your new home.
- Asking for a lower interest rate
Next it’s onto using your bank to help get the most out of your money. Over time your credit rating might improve and it can really pay to ring your banking providers and ask whether they can offer you a better rate. They may say no, so you have to walk the fine line between persistence to get a better deal and irritating the bank employee so much that they close their ears to anything you have to say. Try every few months because it can mean considerable savings on interest.
- If shopping is your hobby, find a new one
If your idea of a fun Saturday afternoon is hitting the racks and buying new clothes or just “browsing” and filling your bags with gadgets then it’s time to reschedule your weekend. Try outdoor activities such as hiking or visiting family or even voluntary work. By filling your timetable with fulfilling, refreshing activities you won’t feel the need to get that shopping ‘high’. And by not spending any money, you can put it straight into that savings account. Another great thing about these activities is that they naturally cut down on food and drink expenses…
- Wining and dining
This can often be a second pitfall that you can avoid be not hitting the streets. Shoppers often sigh and make the lame excuse that “spending is tiring work” as they treat themselves to lunch out followed by a latte. This is a killer if you’re trying to save. Eating out is the devil. Unless you’ve budgeted to eat out for a special occasion it should be avoided at all costs. There are no cafes up a mountain or in a forest and if you’re visiting family or friends I’m sure they’ll be able to give you an instant brewed coffee. Better yet, go to your hipster friend’s house who has those Arabian, cold-pressed coffee beans and a wicked milk frother. Weekends are for living, not destroying your chances of securing a future home! (Maybe you should stick this mantra somewhere in your bedroom).
This reminds me of that one app that drains all of the power from your phone even when not in use. Everyone has subscriptions these days: listening to music, watching shows, magazines, audio books and apps. And what gets people sucked in is the relatively low monthly fee.We recommend you to pull out up a spreadsheet and list every subscription you’re currently paying and add up the annual total. I was in for a shock when I saw my own figure and decided that I had to make adjustments. In some cases it was simply reverting back to the basic form of an app rather than paying for the premium features. Initially, I was grumpy about the adverts that were popping up in the middle of my jam but within a week I’d accustomed to it.I’m not telling you to cancel all your subscriptions: saving for a house doesn’t have to drain the fun from your life (well, not all of it). However, there are probably at least two subs that are neatly being taken from your checking account that would be much better going into your savings.
This is our initial set of tips, if you would like us to go a little more in depth on any particular category please let us know in the comments below.
This information is just our view and should be not be considered advice of any sorts.
From our experience and other professionals we partner and engage with, we work to find useful tips and information that would be important to share.
If you are someone that is looking for professional advice tailored to your circumstance, please contact a bank, financial advisor, or mortgage broker.