Buying a new home can be a significant financial commitment to consider. This is especially true if you’re taking out a home loan to finance the purchase of your new dwelling. Essentially, a home loan or mortgage refers to a loan provided by a financial institution to obtain the funds you need to buy a property.
However, whether you’re a first-time homebuyer or not, you need to give a mortgage deposit or a cash lump sum required by the lender before you can borrow the money for your home purchase. In most cases, the amount of money you set aside for a deposit plays a crucial role in your home loan application. The higher your deposit is, the less money you’ll need to borrow and less interest rate to pay throughout the loan duration.
With these things in mind, it’s essential to save money for your home loan. The earlier you do this, the more money you can save for your mortgage deposit and the faster you can pay the loan in full.
Keep reading this article to know how to save money for your home loan faster.
1.Determine Your Saving Target
When saving for your home loan, it’s crucial to have a saving target in mind to make the process much easier and faster. It’ll help to think about how much you need to save for your mortgage deposit to make your home loan repayments cheaper.
Typically, most lenders require 20% of the property price as a mortgage deposit. This desired target can be your basis on how much should be your saving target for your home loan. For example, if you want to repay your loan in full as quickly as possible, saving 20% or more of the property price as a mortgage deposit can be a good idea. In doing so, you can lower your monthly repayments.
2.Set Up A Saving Plan
After determining how much you need to save for your home loan, the next thing to do is set up a saving plan to achieve your target faster, allowing you to buy the home you want. Your saving plan can include the following ideas:
- Cut down some unnecessary expenses: If you’re looking to save some money for your loan faster, identifying areas of expenses where you can cut back on can be an excellent idea. For example, if you always buy some new clothes each month or coffee every day, you can cut down these expenses by limiting yourself to one piece of clothing and bringing coffee in a thermos flask.
- Reduce your bills: This can be the best way to save some money for your home loan. You can set aside a considerable amount of your income for your mortgage deposit or monthly loan repayments by lowering your outgoing bills. To reduce your bills, you can cancel your unused subscriptions, such as magazines, gyms, clubs, music streaming, and many more.
- Get rid of urgent debts: Paying your debts as soon as possible can help you save more money by minimizing the interest rates you pay over time. To get rid of your outstanding obligations, you can consider debt consolidation or get rid of your credit cards to reduce unnecessary spending or prioritizing debts with high-interest rates.
- Maximize your savings: Get your savings to work harder for your mortgage deposit or monthly loan repayments. You can do this by opening a savings account that offers high interest rates. However, if you plan on taking out a home loan after a few years, having a fixed-term savings account can be a great option. It provides high-interest rates due to your savings being locked for a certain period.
- Make extra money: Another way to boost your savings for your home loan is to earn extra income. Luckily, there are plenty of ways to generate side income, such as doing some freelance works, selling stuff you no longer use, offering some services to others, and many more.
3.Get Help With Your Savings
Apart from your saving plan, there are still other ways to save money for your home loan. These can include:
- Asking a family member to guarantee part of your mortgage deposit to purchase your home as soon as possible;
- Asking your parents or loved ones if they’re willing to provide a cash gift that can be put toward your home loan.
- Living with your parents for a short while to set aside your saved rental money for your home loan;
- Seeking government assistance that’s available in your state to boost your home loan savings.
Bottom Line
Financing a home purchase can be a daunting task. This is especially true if you need a considerable amount of mortgage deposit or monthly repayments to enhance your odds of mortgage approval and handle it in a more efficient way. Fortunately, by keeping these ways in mind, you can save some money for your mortgage obligations and get closer to your homeownership goals in no time.
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