Purchasing a property is one of the most crucial decisions an individual can ever make. In fact, buyig a house involves substantial investments, one of which is surely the down payment. Although there are various home-buying loan options available in the market nowadays, you still need to save adequate money for this particular aspect related to your house purchase. The thing is, you have to save money to buy a house.
Besides, you also need to set aside money for expenses like registration charges, stamp duties, property taxes and interior designing etc. So, careful consideration and a great deal of discipline is imperative if you want to invest money in the right financial options, so that you can generate the maximum ROI from each of them to buy your dream home.
In fact, if you want you can certainly save money in a bank, equity market or governmental bond according to your choice. Wondering why? This is because arranging sufficient funds to buy your most-awaited home is extremely important, and one need not be explained its significance twice.
Tips to save money to buy a house
Coming to property buying specialists, they always recommend that you embark on this journey as early as possible, maybe from the age of 25. Starting early will allow you to save money to buy a home of your dreams within the next seven to ten years.
In case you are also an aspiring home buyer, then, continue reading the post below as it will acquaint you with some really useful tips on how to save money to purchase a property that best fits your tailored needs and budget.
Starts with a Systematic Investment Plan (SIP)
A Systematic Investment Plan is basically a savings-scheme where an investor invests in a mutual fund option on a daily basis. You too can invest in a mutual fund scheme through a viable SIP option by investing as low as rupees 500.
Subsequently, you can make the most of this savings scheme by using its features of rupee-cost averaging and compounding to your best ability. So, make sure that you invest continuously into a scheme like this no matter how the market condition is.
If you do that, you will get fewer units when the market is high and more units when it is low. In return, you can expect a significant cost reduction even when it’s your first time property investment.
Monetize the rest of your assets
If you want to buy your home now, it’s better that you start investing at least three to four years in advance. In case, you have missed out on doing that, maybe you can start investing in the substantial assets that you have and rest assured that it’s going to help you immensely when it comes to investing in the first down payment of your home buying process. Say for instance, you can consider liquidating a fixed deposit of yours if you feel like.
Alternatively, you can borrow against a lump sum FD if you are in a better financial position. Besides, you can also take a loan against any of the insurance policies that you have. This is because at least 85-90% of its surrender value can be utilized as a loan amount as per the norms of your insurance policy company.
Coming to its interest rates, it stays within the limitation of nine to ten percent and you can surely repay loan either in half-yearly installments or at a time. If all these options don’t work, then why not request for a temporary withdrawal from your Employee Benefit Plan (EPF).
On the flip side, personal and credit card related loans incur higher interest rates, so it’s better to avoid them at all costs.
Start with small savings
It’s easy to feel overwhelmed when you have the goal of down payment to meet to buy your house smoothly and effortlessly. But don’t do that as it will only increase your stress level. Instead, start doing small savings from now and calculate how many days or months you are away from the task of your home buying.
To begin with, you can contemplate on the amount that you need to invest in your down payment first. Subsequently, you can divide it by twelve months to get a clear idea of how much you need to save each month to pay for the down payment thing without worrying at all.
Also, if you are opting for a home loan, then make sure that you spend twenty-five percent to the minimum in the mortgage of your house-buying loan. So, start earning extra income and curtail all the necessary expenses from now on, if you are really serious about investing in the purchase of your dream home.
In addition, you can go for a payroll kind of savings plan as well. This means that a particular sum from your regular pay will go straightaway into your savings account. If need be, try and increase your savings rate a bit as it will make the entire house-buying process way more streamlined and hassle-free than before.
Opt for a remunerative savings account
Gathering all your funds in a substantial savings account is probably the finest option to opt for. It is also one of the easiest way to glean the necessary amounts for your home-buying as and when required.
However, you must know that conventional savings accounts generally offer a low interest rate, hence, offer minimal returns on each of your funds. In this case, a high-yield savings account can be of great help.
Generally, an account of this sort lets you earn a higher interest rate as compared to the regular savings account. So, before you start saving, make sure that you have a clear idea of how much your dream home can cost within the next few years or so.
Hence, studying the market thoroughly is very important and if need be you can seek the assistance of a home-buying pro also and the person will guide you every step of the way as you wade through the complex waters of your first property purchase.
Make notable adjustments in your everyday lifestyle
As the saying goes, ”no pain no gain” cannot be untrue in the case of your home-buying too. So, start bringing slight changes to your lifestyle so that you can at least save a significant amount to turn your dream home into a reality.
For example, you can focus on earning some extra income apart from the primary job you are doing. Meanwhile, you can shift to a relatively smaller apartment for the time being as you need to pay a relatively lesser rent for that.
If possible, cut down the unnecessary costs that you think are totally of no use. These tiny yet effective alterations when practiced in your day-to-day living at least for the next two to three years can assist you in making amazing savings to purchase your favorite home smoothly and effortlessly.
Practice the 50-30-20 rule rigorously
One of the finest ways to make excellent savings to pay the down payment of your home is by sticking to the 50-30-20 rule in personal finance as rigorously as possible. According to this, 50% of your take-home pay is kept aside for certain fixed expenses.
Besides, 30% is put in for the essential costs incurred while one can set aside 20% of it for the purpose of savings. Yes, curtailing the costs that you otherwise would spend on the indispensable amenities of your household will certainly not be easy.
But, you will feel as if all your effort and pain have paid you off the moment you enter into your brand-new house.
Important points to consider
Remember that depending on the type of property you want, the amount of down payment can easily range between Rs 500000 to Rs. 1000000 and more. So, doing rigorous research on the present market condition is of highest importance.
By doing so, you will get an insightful idea of what are the properties that best suit your unique needs and requirements and are quite friendly to your pocket as well.
In fact, in 2022 alone more than 2.5 billion U.S dollars were considered worth the investment in this sector. Also, in 2017, the real-estate industry in India was given a value of around one-twenty billion US dollars that is expected to attain a whopping one-trillion dollars in 2030.
Pick the rise property
So, buying a property by picking the right choice in this immensely competitive market might seem difficult at times, especially when it comes to investing in the down payment of your dream house wisely and correctly.
To make things easier, the best idea is to open a savings account in the bank that you think is feasible for you. Subsequently, you can let that amount grow with each passing year until it turns into a lump sum Fixed Deposit (FD).
However, if you are ready to take enough risks, then investing in sectors like the equity market or investment platforms such as mutual funds can be a great idea. Though you have to deposit much higher amounts as compared to your FD or savings bank account, the returns that you will get instead are worth the investment.
Buying your dream home is something you have been longing for a really long time now. Wait for some time more as you execute each of the home-buying tips given above one after the other.
In addition, be wise with your investment decisions and compromise on some of the household expenses that you consider redundant as of now. When you bring about these small changes in your lifestyle and start investing way ahead of time, you can save for your future property in the best possible way. And, guest what?
You make the down payment with peace of mind and the house of your choice is now a whisker away from you.