If you are preparing to buy your first home, congratulations! There’s nothing like moving from the world of renters to the world of equity. I’ve just owned my house for a year, but seeing the equity pile up makes me think about how much I spent in rent over the years – money gone forever. But I digress. If you are ready to make this jump, you need some money for the down payment before anyone will issue you any home loans. Here are some ways that helped me and my wife save for our own. Follow these steps, and before you know it, you’ll be able to call up BOQ to set up your mortgage.
Rent the Smallest, Most Basic Place Possible
If your new home is a year or more away, move into a cheaper rental in the meantime. Moving is a hassle, but if you are able to save $200 or more every month by moving to a cheaper place, make that move and put the extra money away. We rented a comfortably large house for a year, during which time we split the lease with another couple who occupied the first floor and shared the kitchen. It wasn’t the ideal situation, but we saved almost $500 a month. Plus, the inconvenience made us long all the more for a place all our own. Whatever you save, put it away without spending a time. Before long you’ll have thousands to put toward a down payment.
Ride a Bike
Not everyone can go without a car entirely, but many can reduce the amount they drive. For lots of us, a car is simply a convenience. We could get by without one, but we’re so accustomed to having it available, we don’t want to make the change. To put things in perspective, take a look at any of the driving cost calculators available online. I have a 23 year old car. With all costs considered, by cost per mile, is about $1.50. That amounts to nearly $5,000 a year, with the amount I drive. By greatly reducing your driving, or getting rid of your vehicle entirely, you have nearly enough for a down payment on a house, with that change alone. Think about it.
Play the Savings Game
When I’m saving for something that I need soon, I play a savings game. If I want to, for instance, go out to eat when I could easily make food at home, I’ll think about how much the bill will be for me and my wife. At the local place we go a lot, our bill is usually $45. I will then take $45 from my checking account and move it straight to savings. Then I’ll make some macaroni and cheese. We do this with movies, impulsive purchases, anything we could buy but don’t need. I’ve saved hundreds a month this way.
If you follow just these three savings principles, you’ll have a lot of money quickly. I would add to this: try to get better rates on insurance, see if a generous relative will help you foot the bill, find a side hustle job for evenings or Saturdays (saving every dollar you make). There are plenty of ways to save money, all of them inconvenient, but just think, you don’t have to do it forever. You are saving for something that will change your life forever, and it’s worth the momentary suffering. I hope you’ll be able to fund that down payment fast.
[Photo Credit: Steven Depolo]