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Buying a property is the biggest investment most of us will make in our lifetimes, both in terms of finances and in terms of putting down roots and choosing a community to integrate into. Of course, most mortgages make paying back a home loan roughly equal to rental prices in terms of monthly outlay. But the costs of a down payment, taxes, renovations and other fees still make buying a home prohibitively expensive for many people. Like many problems, the best way to tackle it is to break it down into smaller, more manageable pieces. There are lots of ways you can save for a mortgage, from small day to day savings to bigger, broader cutbacks. Here are some tips to help you get started.
Open a savings account
Divide and conquer your finances! If you split your earnings into different accounts you’ll find it much easier to organize, limit and keep track of your spending. Set up a savings account and automate it so that your paycheck siphons whatever you can afford to save straight into it. A handy tip: don’t have a debit card linked to the savings account! This eradicates the temptation to dip into your saving pot, or at least makes it much more difficult. Once you can manage your finances more effectively you’re well on the road to saving for a property.
Credit cards and loans
First of all, pay off your credit card as soon as possible. Not only will that cut down your monthly outgoings, it will also boost your credit score. It has been shown that to maximize your credit rating it is advisable to stay within 20% of your total credit limit, and to make at least the minimum monthly payment. It’s best to pay off smaller loans or to consolidate them effectively. When you go to apply for a mortgage you should shop around for lower interest rates, and look for offers available through home loan specialists.
A good broker or lending institution is usually in a partnership with a number of lenders, so don’t refrain from scouring the internet for the best one for you. Additionally, use all available tools and calculators that are on offer, as these can fairly accurately present you with all the available options that are tailored to your financial situation (as long as you faithfully provide the relevant information, of course).
Keep track of your spending habits
Streamline all aspects of your life, from your leisure activities to coffee breaks at work. Why not invest in a french press and a bag of good coffee? This (weekly or monthly) costs a fraction of the price of expensive cafe bought drinks with no substitute in quality. Instead of an expensive gym membership use the local parks (many of which have exercise equipment in them nowadays) and feel the burn for free. Better still, run or cycle to work, so you’re not only getting a workout but also saving on commuting costs. Love reading and splurging on books and e-books? Join a local library instead! The savings you make may seem small, but they do add up. Assess these savings on a longer-term basis – how much is the gym costing you a year?
Taking money from an ATM every time you want to buy anything might seem like a real hassle. And that’s exactly the point! The whole process makes it much harder to impulse buy, and keeps you budget conscious when you’re out and about. It is easier to set limits for your spending in any given situation (nights out are a prime example of overspending, especially when your inhibitors are down due to a glass of wine or two). Having money physically in your pocket makes you think much harder about your transactions, rather than flashing the plastic (and then forgetting about the costs). All in all, the harder you make it to spend, the less you’ll spend on unnecessary things (and you will become naturally more budget conscious).
OK, so you might have to turn down a few invites from friends, or maybe skip the expensive cinema trip and just meet up afterward. Or skip the pre-dinner drinks. Or just stay home (with your library books!). But don’t forget the value of NOT doing things. In fact, try keeping a calendar of invitations you turned down, and make sure to note how much money that saved you. Not only are you finding a silver lining (literally) on the cloud, you’re also training your brain to be more goal focused. And what better goal than owning your own home?
Limit online spending
It is so easy to spend money freely and wantonly online. All major online retailers have expert marketing traps, all designed to make you part with more cash. Bundles, bargains (usually things you wouldn’t buy if they weren’t discounted), bits-and-bobs. We spend so much money on unnecessary things. Remove your details (especially your credit card details) from your favorite online shops to make it more difficult to impulse buy. Take some time out to ask yourself if you REALLY need another vintage lamp or novelty cell phone cover. Identify what kind of mood you’re usually in when you shop online (depressed, happy, bored etc), and train yourself to avoid making any financial decisions in that mood. Similarly, if you have an apartment full of impulse buys, try reselling them – online or in a good old fashioned yard sale.
Use an experienced real estate agent
The best recommendation you can get for a real estate agent is from friends, neighbors (or if you’re feeling bold, potential new neighbors). Ask around, make sure you find someone you trust, feel comfortable asking questions, and who is a clear communicator. Remember, you’re about to make one of the biggest investments of your life, so you need to get a good team onside.
Look for a ‘fixer upper’ (and get a survey)
A property that needs a little tender lovin’ care can be drastically cheaper than a fully furnished, all mod cons property. Make sure you get a survey done on any home you’re aiming to buy, and try to estimate roughly the cost of the work you’ll have to have done. ‘Fixer uppers’ are great if you have the time and creative energy to spend really personalizing your new home.
These ideas are just the tip of the iceberg in terms of saving money. Of course, you could live on nothing but rice and potatoes for a year, but there are less drastic self-denying ways to budget. Just remember, even the smallest saving is another step on the way to owning a home!