The importance of a home purchase is reflected on both the personal and financial side of a person’s life.
A key element of moving forward with the purchase of a residence is to amass an appropriate downpayment for a home. There are seven tips to bear in mind when it comes to saving money for a downpayment on a home.
1. Channel tax refunds into the downpayment fund
A solid place to start in saving money for a home down payment is to set aside tax refunds for this purpose. Most folks use their tax refunds for something that might provide more immediate enjoyment.
You can give your downpayment fund a solid jumpstart by placing your tax refund into it.
2. Automate transfers
Schedule a monthly transfer of a set amount into your bank account or sub-account designated for property funding.
Select an amount for automatic transfer into your down payment account that will not inappropriately impact the reasonable amount of funds you need for daily living.
Nevertheless, you do not want to make this amount so small that it proves to be of little help in saving for a down payment.
In the overall scheme of things, the money you elect to set aside monthly will prove to be one of the more important sources of funds for that important objective.
3. Save bonuses and salary increments
If you are in a position through which you earn bonuses or can expect a raise, designate these towards your home downpayment.
The reality is that you should be living within a budget that doesn’t require these additional funding increases.
Rather than increase your budget with these sources of funds for other discretionary expenditures, use the money to help fund your home down payment.
4. Keep your old car or just Grab
Many people look for a new car once their current one is paid off. Indeed, some people start the search well before an existing vehicle loan is satisfied.
Another prime home downpayment saving strategy you will want to employ is to keep your existing car when the loan is paid off.
Rather than immediately purchasing a new vehicle, direct the money once used for a car payment into your home down payment account.
For many, this proves to be a significant contribution to the fund and speeds up the process of getting a down payment in place.
It is increasingly common as well to use ride sharing, public transport and/or car pools to get around. Do the maths, and see if it makes financial sense to save more than a few sen every month.
5. Tap into your retirement account
Before considering this tip, you do need to keep in mind that there is an element of left pocket to right pocket associated with this tactic and that it reduces your retirement funds available.
The Employees Provident Fund (EPF) allows you to withdraw up to 100% of your EPF account 2 with no penalty if you intend to use it to purchase a home.
Yes, you will be taking money out of your retirement fund. However, you are not penalised for doing it and you will be placing it into another important investment in the form of a home.
Provided that retirement is not looming on the horizon, this can be a suitable, reasonable strategy for boosting your downpayment fund.
6. Use automated savings programmes/apps
Various banks and financial apps are introducing automated savings programmes or apps.
This is how it works – a debit card charge or e-wallet is rounded up to the next full dollar amount or your savings get automated. This savings is then placed into a designated bank account, in this case your downpayment fund.
While this accumulates very slowly over time, if you are an avid user of your debit card or supported e-wallets as many are in this day and age, these small savings do accumulate to a relatively decent bit of money in the course of a year.
In the end, when saving for a down payment, every little bit helps. Moreover, this is typically a painless way to add some money to a home down payment fund.
7. Refinance existing loans
If you have other loans, look at the potential of refinancing. If you qualify for refinancing of your loans, this can be an aid in your endeavour to save money for a home down payment.
You can use the money from the loan refinancing and apply it to your home down payment fund. Do note that this may be higher risk and entail additional fees, so do your homework
Make sure you absolutely understand what you will need to pay in the way of a down payment on a home purchase.
A 10% down payment is the norm on conventional loans. You may have the ability to make a smaller down payment if it’s your first property and/or with developer rebates.
This article first appeared in https://mypf.my
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