Most of us want to tick ‘buying a house’ off our bucket lists as soon as possible. But a house is a big-ticket purchase, which requires planning early on so you can save enough for a decent property or for at least its down payment. In addition, there are miscellaneous expenditures that come with a house of your own like stamp duty, property tax, registration charges, etc.
If you’re wondering how to save money to buy a house, this blog post is for you.
How to Save Money for a House
1. Make Required Lifestyle Adjustments
If you are highly focused on saving for a house, you may have to eliminate factors that may be holding you back. For example, moving into a smaller apartment before you finally buy your own house may help you save significantly on your monthly rent.
You may also need to cut down on unnecessary expenses like frequent movies, vacations, or memberships.
2. Set Financial Goals and Budget Your Money Accordingly
When saving money to buy a house, this has to be the most important strategy. By setting financial goals, you can understand exactly how much you need to save and by when. This will further help you create a budget and stick to it.
The best way to stick to your budget is by following the 50-30-20 rule. This means that 50% of your monthly take-home income can be used for fixed expenses like rent, utility, etc. 30% can be used for discretionary expenses. And the remaining 20% should be set aside for saving for a house. You can explore the best savings plans in India available to your and look for the one which will help you attain your savings goal.
3. Look for a High-Yield Savings Account
If your savings are resting in a savings account without it bringing you any significant profits, you’re probably doing it wrong. A high-yield savings account is the best investment plan for buying a house since you can earn interest on the amount saved. One super reliable option is Freo Save’s digital savings account which allows you to earn up to 7% interest which is even better than a fixed deposit account.
Moreover, the digital savings account with Freo Save gives you access to other benefits like credit products, access to a credit line, insurance on balance, etc.
4. Cut Out the Bad Financial Habits
No amount of research on how to save money for a house can really help you if you’re not ready to let go of bad financial habits. So, direct the money for your expensive habits to your down payment fund. For example, if you tend to make impulse purchases online, try to unsubscribe from brands’ marketing emails. If you tend to eat out a lot, practice cooking at home to save money.
These little lifestyle changes can help you reach your financial goals faster.
5. Monetize Assets
Paying fixed installments every month is much easier than arranging for a lump sum amount for the down payment of a home. So, you can monetize your assets and get enough funds to purchase a property in installments. For example, if you have a fixed deposit account and are in a better financial standing, you can borrow against your deposit amount.
You can also use a life insurance policy to borrow funds against. Depending on the terms and conditions of your insurance company, you can borrow up to 85-90% of the surrender value. You can also request a partial withdrawal from your EPF i.e. employee benefit plan.
6. Pick Up a Side Hustle
You can leverage the gig economy to make money on your own time doing what you like. For example, if you’re into photography, you can take up some pro bono work to create a portfolio and then start taking up freelance photography projects. You can refine your skills as an artist and start earning from your hobbies.
Similarly, you can offer consultation based on your profession or what you’re skilled at. You can also go for unskilled jobs like pet walking, ridesharing, etc.
7. Get Rid of the Debt
When you’re considering a home loan, it is important to remember that the more debt you have, the less favourable you become as a candidate. This means that you may end up having a higher down payment requirement and paying more interest.
So, before you jump into it, take time to reduce your debt. Figure out ways to reduce the interest. For example, you can consolidate different loans instead of paying different interest amounts to different banks.
Also, if you have been paying the minimum due amount against your credit card bills, eliminate this habit right away, Make sure to pay the amount in full, which will reduce the interest that you have to pay as well as improve your CIBIL score.
Buying a house is not an easy feat and saving for it is not something you can do overnight. It may take you 5-10 years to save for your dream house. But if you do it right and break down your strategy in phases, you will see yourself getting closer and closer to the destination very soon.
Keep these tips explained above in mind and you will certainly be able to make the most of your income to save for a house.