Are you dreaming of owning your own home? But you need either a lot of money in your savings or take out a home loan to fulfil your dreams. If you are taking a home loan, then saving for a house downpayment is the significant first step toward turning that dream of yours into a reality. A house downpayment is a significant chunk of money you pay upfront when purchasing a home. If you are looking forward to understanding how you can save money for this downpayment, then here is the read for you. In this article, we would be learning about major ways through which you can save quite a lot of money.
What is a House Downpayment and How Does it Work?
In simple terms, a house downpayment is actually a lump sum of money that you need to pay when buying a house. It is basically a percentage of the total home price and usually ranges from 3% to 20%, though it could also be more depending on the type of mortgage and your financial situation. For example, if you wish to buy a INR 1 Crore house and the downpayment requirement is 10%, you would need to pay INR 10 lakh upfront. And this amount of INR 10 lakh would be your house downpayment.
Benefits of a Large Down Payment
Ways to Save for a House Downpayment
Now, let’s understand some ways to save for a house downpayment. These house down payment strategies can certainly help you a lot.
Create a Budget
Before you look out for ways to save money for downpayment, start by examining your monthly income and expenses. Check for areas where you can cut back and dedicate those savings to your homeownership fund. You can also use tools like budgeting apps to track your spending.
Set a Savings Goal
Now comes the major part, which is determining the amount you need for your downpayment and creating a timeline for reaching that goal. For example, if you need INR 1 Lakh in two years, aim to save INR 8333 per month. You can also open a separate savings account for this purpose. There are also several ways to save money through investments on various platforms such as 13Karat.
Homeownership Savings
As mentioned above, consider opening a dedicated savings account for your downpayment. This would make it easier for you to track your progress and ensure that you don’t spend these funds for other expenses.
Automate Your Savings
Yes! You can also set up automatic transfers from your checking account to your dedicated savings account on each payday. This would ensure you are making consistent contributions without spending the money elsewhere.
Cut Unnecessary Expenses
Of course, there is no doubt that you need to cut down your expenses. For that, you need to first review your spending habits and identify those non-essential expenses. It would actually matter a lot if you skip that daily coffee shop visit, dine out less, and limit your impulse purchases. Now all these savings, you can redirect the money into your down payment fund.
Increase Your Income
Well, certainly not in our hands, but you can definitely explore opportunities to increase your income. You can resort to taking on a part-time job, freelancing, or selling items you no longer need. Now all the additional income can go towards your down payment.
Down Payment Options
Another way is by looking into down payment assistance programs, grants, and loans and it would be helpful if you are first-time homebuyers. There are several programs that offer financial support or lower down payment requirements, thereby, helping you get into your new home sooner.
Housing Affordability
You can also consider homes in a price range that aligns with your downpayment savings. The more affordable the home, the less you would need for a downpayment.
