For most people, buying a home is the largest purchase they will make in their lives. They also usually won’t do it more than once. No matter your financial situation, chances are you will have to do some saving. As with any big purchase, saving up money for buying housing is likely to go very slowly. One of the mistakes home buyers often make is not coming at it with a strategy. These tips for saving up money for buying housing should give you an idea of what might be some useful approaches to try.
6 tips to save for a house
1. Set the budget
Before you start seriously considering properties, you need to determine what you can afford. Obviously, things can change over time, especially in real estate. However, setting a goal that is somewhat clear will give you motivation and a timeframe in which you can expect to move in.Do a little bit of research. Look at different properties that you feel would be within your reach. Bear in mind that the money you spend on housing shouldn’t exceed a third of your total earnings. Once you have all this information, see how much you think you would need for a down payment. These are the percentages in Canada:
- for homes costing $500,000 or less – 5%
- homes between $500,000 and $999,999 – 5% for the first $500,000 and 10% for the portion of the price above that amount
- properties costing $1 million or more – 20%
2. Reduce debt
If your plan is to purchase a home with credit, your debt can be a serious impediment towards reaching that goal. Firstly, if you’re paying off debt, it is likely that a sizeable piece of your earnings will go towards paying it off. Secondly, the debts could limit the amount you can put towards a mortgage. Even worse, they can ruin your credit score which can affect you by making you ineligible for reasonable interest rates. Finally, paying off debts will free up large amounts that can go towards saving up money for buying housing.3. Open a savings account
One useful way how to save for a house would be to open a savings account. Nowadays, this is easier than ever. You can open an online savings account from the comfort of your home and get started on your home savings plan. An additional benefit of online saving is that online banks offer higher rates than regular banks. This way you can really make the most of compounding interest.Adopting this good habit will come in useful even after you have purchased your own home. In order to have a relocation that is stress-free to any part of Canada, you’ll need to hire professional help. If you’ve spent all of your savings on the purchase, you will have to struggle to handle the relocation yourself.
4. Make your savings automated
Automating your savings is the key to any successful savings plan, not just when you are saving up money for buying housing. With automated savings, a part of your paycheck will automatically go in your savings account as soon as you get paid. This way, you won’t get a chance to feel tempted to spend your money on something else.If you don’t have the option to automate your savings, try putting the money aside yourself as soon as you get paid. You want to stop yourself from skipping on making that monthly payment as much as you can. There are even apps that will take out a daily amount out of your account and put it towards your savings. Many people love using this as the amount itself is barely noticeable, but what it amounts to at the end of the month is much harder to miss.
5. Reducing expenses
Setting a budget for your future home seems pretty straightforward. However, setting a budget for your day-to-day spending that will allow you to put sizeable portions of your income towards saving up money for buying housing is a very different story. If you feel like you are living paycheck to paycheck already, the situation turns even more dire.One way you can start modifying your budget in a way that you can afford is taking a detailed look at how you spend your money. Once you do that, try lowering it by 10 percent across the board.
It would be a good idea to have a test month. During this month, you would account for every expense on a piece of paper or a spreadsheet. Having everything in black and white like that might show you places where you can make adjustments easily.
Many times, you’ll hear things like cutting back on small luxuries like takeout, coffee to go, magazine subscriptions or shopping. While these things seem like the most obvious places that eat up a lot of your money, sometimes cutting out something that makes your life comfortable or enjoyable is not always the best way to go.
6. Find a way to increase your income
This final tip for saving up money for buying housing is quite obvious, but also easier said than done. Nowadays, it is possible to get a side hustle a bit more easily than it was before. This is one benefit of the gig economy. Driving for a ridesharing service, providing child care or pet care, doing some simple home improvement projects… There are many opportunities that don’t constitute full-time employment, but they will strengthen your earnings and make it easier to save.Final thoughts
As you can see, saving up money for buying housing will require a lot of adjustment and even sacrifice. Keep your eye on the prize, though. You will soon be able to reach your goal and enjoy the fruits of all of your hard work.