How to save for a new home
Buying a home is a huge step forward in adulthood, but it’s also a huge financial commitment. Saving for a down payment is difficult if you also have to pay for basic necessities like food and rent.
If you want to save up for a down payment on a property, it’s important to devise a strategy that will allow you to do so.
If you want to buy a house, here are some ways to save money for your dream home.
1. Start by setting up a budget
The first step is to calculate how much money you need to save and to assess your income and spending to see how quickly you can get there.
Most lenders prefer a 20% down payment, but others may accept as little as 5% if you satisfy certain criteria.
It’s preferable to aim for 20%, and if you don’t require the entire amount, you can apply sooner or utilize the excess funds to cover the first few payments. Also, keep closing costs in mind, which are typically between 3-6% of the transaction price.
2. Create additional income channels
You may also want to consider new strategies to earn income in order to meet your objectives more quickly. You can accomplish this by requesting a raise at work, beginning a side hustle, or creating an online business.
If you’re having trouble saving because you have too many necessary costs, the only option to speed up the process is to earn more money. If a raise isn’t an option, perhaps you can freelance or drive for Uber in your spare time. You might have to be resourceful, but the more money you can make, the easier it will be to save.
3. Improve your credit status
Working on your credit can help you save money while also getting you approved for a loan with better terms, such as a smaller downpayment. Try to pay off as much debt as possible to improve your debt-to-income ratio and lower your monthly interest payments.
Pay your bills on time and make sound financial decisions. Working on your credit score can also help you receive a cheaper interest rate when financing a car or taking out other loans, allowing you to cut your typical expenses and put more money aside.
4. Stop spending on unnecessary luxuries
If you frequently order takeaway for lunch, you may want to start carrying a lunch bag instead. If you can manage to make your own coffee instead of going to the shop regularly, you’d be shocked at how much money you could save to put towards buying a home.
5. Sell some stuff
Perhaps it’s time to go through your home and decide what you don’t need. Assume you have unused clothing, homeware, collectibles, or other goods. In such a situation, you may be able to sell them on the internet. . .
Frequently Asked Questions
How much money should I save before buying a house in South Africa?
You should have saved enough to pay your deposit. The deposit notifies the seller and lender that you are serious about the transaction. If you have the option to deposit more than the needed 10%, you should do so because it will shorten the period of the loan, reduce the required monthly repayments, and earn you a better interest rate.
How much can I save to buy a house?
Depending on the seller and estate agency, the required deposit amount might range from a few thousand rands to 20% of the home purchase price. However, most contracts require a deposit of roughly 10% of the buying price. Naturally, the larger your deposit, the better.
Can you buy a house with a 100% deposit in South Africa?
A 100% home loan allows you to finance a home without putting down any money. With their 100% home loan packages, banks are ready to appeal to first-time house purchasers.
Applying to various banks through a home loan comparison website increases your chances of getting a 100% house loan.
What should I budget for a new house?
The 28% rule, which states that your mortgage should not exceed 28% of your total monthly income, is one of the simplest ways to calculate your homebuying budget.
