Buying a house is no small feat in this day and age.
Whether you live in Toronto, Victoria, or Halifax, becoming a homeowner is a great accomplishment for someone in 2020. With economies in flux and housing markets seemingly rising everywhere, it’s just too expensive for most people to even conceive of purchasing a home.
But, there are ways to save and raise funds to make it happen. Today, we’re going to give you an informative guide on how to save money to buy a house.
As long as you’re patient and frugal, there’s no reason you can’t make a down payment in any city you’d like to live in.
How Much Do You Need to Buy a House?
Owning your own home seems like such a foreign concept to most people under the age of 35, especially those that are fond of city life. When you really break it down, however, you’ll realize that the only difference between the cost of renting and owning is the down payment.
If you can get the down payment out of the way, your mortgage payments might amount to somewhere in the same range as your monthly rent payments. Granted, coming up with that large a sum of money is never easy. You’ll need to put at least 5% down in most cases, but you can go higher if you want.
So, if you’re buying a $700,000 home, you’ll need to invest $35,000 as a 5% down payment. The more you put down, the more manageable your monthly payments and the more flexibility you have with your mortgage terms. But how do you come up with $35,000?
Learning How to Save Money to Buy a House
Not everyone is fortunate enough to be able to stash away loads of money to save for a house. Most people, especially younger ones in big cities, use most of their income to pay for rent, food, and the ever-growing expense of living. That’s how you find so many 30-somethings that feel like they’ll never own property.
If this describes you, you might be surprised at what cutting costs in a substantial way can do. First, you’ll want to gauge the housing market in the city that you want to live in. That’ll determine what price range you’ll be in and thus, how much you’ll roughly need for a down payment.
You should also take into account how long of a mortgage you want and how much you can reasonably afford to pay per month. Factor in other costs of living too. Remember, when you’re the owner, you have to pay all the bills and take care of all the maintenance on your own.
Once you’ve crunched the numbers and figured out what your down payment needs to be, you can start saving.
Get Your Debts Under Control
Before you can really start saving, you need to get your student loans and credit card debts under control. Not only is it going to be hard to save with payments coming out of your account every month, but you’re also going to have a tougher time getting a decent mortgage with unsettled debts.
You may also need to take out a loan or two to put you over the top. Make sure that you’re not juggling too many things at once.
Start a Down Payment Fund
When you’ve got a good idea of how much money you need to come up with, you can break it down a little bit. For example, if you’re trying to save roughly $20,000 in a year, then you need to come up with $1,670 per month.
When you can break it down to a smaller monthly expense, it doesn’t feel as daunting. Start throwing any bit of extra cash you obtain into the house fund: birthday money, inheritances, the money you won from your fantasy hockey league. Basically, any little bit helps.
Unless you get a substantial promotion at the exact right time, that money isn’t going to come out of just anywhere. You’re going to have to cut costs any which way you can. Here are some of the things you can give up or do less:
- Stop eating out for dinner.
- Quit drinking.
- Cancel gym membership.
- Cut cable.
- Change your phone plan.
- Shop at a cheaper grocery store.
- Don’t go shopping.
You could also try putting a halt on using your debit card. Just take out a certain amount of cash per week and learn to ration it responsibly.
Downsize and Sell Things
One of the best ways to cut costs significantly is by downsizing your living situation. If you’ve got a nice big downtown apartment that you’ve been living comfortably in, it’s probably costing you a good amount of money.
Ditch those fancy digs for something a bit smaller and less convenient. It may not be perfect, but use your future dream home as motivation to get you through the year.
That few hundred dollars less per month is going to make a huge difference in getting you a down payment in a decent time-frame.
When you downsize your living situation, you can also begin to sell off some of the items that you don’t need. Not only does this clear up any clutter in a smaller apartment, but you can make some strides with your down payment fund. Of course, when you move into your home, you may have to replace some of those things.
Get a Side Job
Another great way to generate a significant amount of extra money is by getting an evening or weekend job. Again, it’s not going to be ideal for your current way of life, but when you start to see the cash flow into your down payment fund, it’ll all be worth it.
It Takes Commitment
Figuring out how to save money to buy a house takes a frugal mindset and commitment to the dream of homeownership. Sometimes you have to learn how to give things up in order to get what you want.