Tips on Saving For a House Deposit
So your thinking of investing into real estate? But you don’t have a house deposit and you want to save one. Need some tips on saving for a house deposit. This is a great (and often nessecary) thing to do before you begin to invest into the real estate market. Saving $60,000 may sound like a lot of money, but if you think about the massive investment you are becoming involved in (around $300,000 or above) then $60,000 doesn’t sound like that much.
What are the advantages of saving a house deposit?
* You don’t have to pay Lenders Mortgage Insurance
Banks and lenders often charge a fee known as Lenders Mortgage Insurance when you cannot come up with your 20% deposit. This is to insure the loan in the case that you cannot pay it back and that the house is no longer worth as much as the loan. The less of a deposit you have the higher the fee you have to pay.
* You can get a loan easier
Banks and lenders will be much happier to give you a loan with a higer deposit. This means there is less risk for them, and banks hate risk.
* You can build equity quicker
With a larger deposit, you have lower fees, lower interest rates and less money to pay back. Therefore the interest that you pay decreases significantly. This means that your loan will go down faster, and as your properties equity rises this allows you to build equity faster. Equity = Total value – total debt. Therefore if you decrease the debt quicker you increase your equity.
So what tips can I give you to help you save for a house deposit?
* Have a Goal
Have a goal of how much you want to save and when you want to have that amount saved by. Make it realistic, but also make it a decent goal worth aiming for. Studies have shown that people with strong goals achieve much more than people without goals. So set a strong goal, and then work out how you can work towards it. You may have to make some sacrifices, you may have to be flexible with your money, but set goals and work to achieve them.
* Cut Your Spending
Having a budget and cutting your spending are the first things your are going to have to look at when saving for a home loan. Obviously you want to save for a home loan as quickly as you can and in order to do that you will need to cut your spending. Often this doesn’t even involve much sacrifice (just buying clothes out of season, or shopping when the specials are on, or sales).
* Bank Your Excess
The only reason you cut your spending is so you have excess left over. You need to bank this excess (don’t just spend it on something else). “Bank little, bank lots”, it is amazing how every little bit accumulates into something much larger. Get in the habit of banking on a regular basis and leave the money in there.
* Start Earning More Money
This can be as simple as picking up a few extra hours at work, or maybe getting a second job. Better yet, why not work smarter instead of harder and earn more money for working less hours? There are many ways to do this. Personally I have chosen to make some extra money online by selling great financial training resources (CLICK HERE to buy my resources). Find ways to make extra money, and then bank ALL of it.
* Invest your money while saving
Many people when saving a home deposit just put their money in a bank account that charges them money to have it there. Why not open an online savings account at least? You can easily earn 7% on your money for doing nothing (and you can access it whenever you want for many of the online savings accounts). Say you wanted to save up $60,000 over 2 years. You saved $30,000 in the first year. If you invested that and earnt just 7% per year on that by the end of your second year it would have made you over $2,100 for doing nothing. So as you save your money invest it straight away and let your money do the work for you.
* Be Flexible
This is my last tip and it simply talks about the minset you need to have. You need to be willing to be flexible. Don’t be rigid and stick to your ways, be open minded and always looking for new ways to make some extra cash or save some extra cash. Have a mind that is open and wants to learn new things, then next time you need to save up it will be easier also. So be flexible to changes and keep an open mind