Living in a rented home has some advantages versus buying a home. You have no responsibility for the major items that come with the house, for instance if your water heater breaks, you call the landlord, if your roof leaks, you call the landlord, but one of the real advantages of owning your own home, it’s appreciation value, also goes to the landlord. Making the change from renter to home owner takes planning if you want it to be as stress free as possible, and saving large money is the biggest challenge every potential home owner has to face.
There is no quick way to come up with the cash needed to purchase a home but with a bit of planning you can build up the bank roll you need for a home, or any major purchase, in a shorter time than you may think.
Serious saving always has three essential parts:
- Goals
- Economising
- Saving
GOALS
Before you set out on such a large financial project you need to set goals. You need to look at the types of home suitable for you to see how much they cost. Then you need to look at mortgages and see what is available to you. One thing that as a major impact on the mortgage product that will be offered to you is your credit rating. Obtaining a credit report is essential in knowing how you will be viewed by credit providers but knowing how to interpret it can be a challenge. By contacting a reputable credit agency, like The Credit Agents, they can walk you through your credit report, help you fix any problems, and advise you on how to protect your credit rating as your save for your new home.
Once you know what mortgage products you are looking at, you’ll have an idea of what size of down payment you are looking at for the deposit, but this isn’t all you need. Find out how much it costs to administer the sale (lawyers, registrations and fees), as that is also in the thousands, and don’t forget you need a buffer for anything that you need after move in. If you are in a furnished home, you’ll need all new furniture, you may need to buy or replace some of the major appliances, or the home may have some unsuspecting nasty’s hiding under the fresh paint that you’ll need to attend to pretty quickly to contain the damage. For these unforeseen circumstances add at least an extra 10% onto your down payment costs.
ECONOMISING
When you first look at economising – think big! What can you do without? Have you got an empty room that you hardly use? More parking than you need? A huge garden that is tended by a service because you don’t have time? Losing a bedroom on your home will save you around 25% of your rent, or if you don’t want to move look to rent it out. Saving for you own home will take years rather than months, so you have the time to move into a smaller home and rake in the savings each month to go towards your down payment. Moving home will also give you a chance to sell all your unwanted items that you don’t use to generate more savings. Do you really need a home gym? Sell the equipment you don’t need, downsize your rented home, and join a gym. If you don’t use the gym it’s time to rethink your goals to something a little more achievable. Something as humble as a yard sale will generate some savings and mean you have less to move when the time comes.
An average a car costs you $8,500 a year. Many view a car as a necessity, but do you really need two? How much more hassle is going down to one car… compared to owning you own home? Owning a car will only ever cost you money, there is no saving scenario, unless you live too far away from transit links – then you need to consider moving nearer one to save the amount of money needed for a new home.
After the big purchases you can look at small economies as they soon mount up. One essential thing to do is budget! Look at where your money currently goes and see where you can save. If you eat out with friends, how about a home pot luck? Re-evaluate your vacations, leisure time and entertainment and see what you need, not what you want. Use this approach on all of your budget, right down to the food you eat. Cutting out brands and purchasing economy or generic foods will save you money that you can put towards your new home.
SAVING TO BUY A HOME
Now you have made some economies and are generating savings, you need to make your money work for you. Smart saving is really important to speeding up the process of saving to buy a home. Make sure you take some advice to get the best accounts that will help you achieve your goal so your money is helping you reach your goal 24 hours a day, seven days a week.
One thing you’ll have an abundance of when saving for a new home is time. Something you may not have thought of is how many skills can you learn to save you money in that time? Look at your local home hardware chain and see if they give free classes or lectures about things that you could learn to help you save money. When you own your own home you’ll need these skills, and maybe you can use them to generate some more savings.
When you are saving take every opportunity to earn more savings. Don’t look at it as ‘more income’, look at it as ‘more savings’. If you get overtime at work, save it. If you get tips, save them. If you don’t get extra money in your regular job, look at getting a second one, but make sure you save all your earnings. You may work hard but it’s no time to play hard. You can take time to play in your new home.
Another great way to save whilst you wait is to consider moving into a ‘rent to own’ home. These are homes that let you live in the home you want, renting it for set period of time with the deposit saved from the rent each month, and at the end of the term you buy the home through traditional financing. Make sure you consult professionals with this kind of home buying program, but it’s a great way to get into your dream home as soon as possible if you have credit issues.
Saving for a home takes a long period of time and an aggressive plan, but you can do it! By sticking to the tips we have shared you can be enjoying your own home sooner than you think.
