If you see Mike ordering the minuscule Mcchicken burger instead of the Double Big Mac – he’s not trying to lose weight. Just saving for a mortgage loan!
Stepping out on your own is a big step. No one tells you saving money for a home mortgage can be likened to getting tossed barefoot into a jungle of risk.The outcome is mostly determined by the first steps you take in acquiring the funds to pay for your humble abode.
Don’t they know you bought a ping pong table all on your own ?.
And when you finally do get them to – they want a hefty downpayment – as if you don’t have enough payments weighing you down already.What is one to do but save.”Save’’ how? you might frustratingly ask. Let me save you from early onset wrinkles with this
If you want to save money – you start by saving money
It’s gotten too easy to open up a savings account – Nowadays you don’t even have to go through the door’s of your bank to do it.You can just access your online banking service & make the necessary arrangements without waiting in line.Most banks have an app that you can easily install on your phone to complete this process.
This is an exercise in discipline – you are going to have to work out how much you need to save on a consistent weekly/monthly the basis to come up with the capital for your dream home.
*Take the total amount you need to have (lets assume $30000)
*The number of years it’s going to take to pay it off(let us assume = 3 years which translates into 36 months)
*The interest rate at which your bank’s fees are charged – savings accounts are usually compounded daily.(let us assume 1% compounded monthly)
In case of deposits – it depends on what it is the nature of the deposit & the bank you use
*Now let us add that up and see how much you need to save: 30000 /36 =833.33
roughly you have to save $833.33 per month
*Then we divide the interest rate by the number of months : 1% / 36 = 0.027 %
The interest compounded monthly for 36 months is 0.027%
*Finally – you take the full amount, number of months to pay and the bank’s interest rate compounded monthly and use the compound interest formula to determine your monthly savings
Sharing ownership -Equity loans
These work best when you have 5% deposit on your dream home, but can’t come up with the rest of the payment.Government schemes are available to those in need of a boost.With schemes like Help to Buy – first-time buyers can afford a house & some peace of mind
The compromise here is that you get to buy the house, but don’t get to fully own the house outright – how these works are that the house association or developer allows you to own a certain percentage of the shares (5% to 25 %) in the house – then pay off the remaining shares as rent in the form of a lease.Like a big brother who befriends the girl of your dreams & keeps off thirsty suitors while you get your act together & mature enough to swoop in & take over(let’s hope he doesn’t kiss her)
With time, when you feel that you have saved enough for your budget to allow you to take on more responsibility – you can extend the percentage you own on the house via a process called staircasing.Though associations are very fond of keeping homeowners on a lease – this can even escalate up to 100% ownership
On new build homes acquired under Help to Buy ; the loan for the first five years is free. You have enough time to figure out how you are going to pay the withstanding amount when year six kicks in
That friends & family list
You can swallow a huge portion of your pride & save a chunk of money if you let your family/friends help you(family is more preferred).The bank is ruthless when it comes to matters of trust.First time housebuyers are a great risk when it comes to giving out loans — having their parents act as a guarantor, who pays off the loan when they forfeit to finish the outstanding balance is just about enough to soothe the bank’s & your worries about saving money.
Buying with a friend should be your last option – you never know how long these things last