When applying for loans, down payments are usually required to cover a portion of the total loan amount. It is something you pay for when purchasing a home, a car or other valuable assets. But let’s say you are taking out a mortgage: How much should you really pay for the deposit? While others prefer to keep mortgage deposits as small as possible, paying a bigger down payment is better. Why? Because it will make the remaining amount of the loan smaller since it will reduce the total cost of the interest over the life of the loan. This means lower monthly dues to take care of. So how do you save up for a mortgage deposit? Here are some tips you might find handy.
Create a budget
No matter what you’re saving up for, one of the most critical steps is creating a budget. A realistic budget is important in helping you achieve your goals when it comes to saving money. It will give you a good look at your income as well as expenses. It will allow you to see the items you can cut back on so you can set aside more money for savings. Once you have created a realistic budget, it will be easier to start saving up for the mortgage deposit.
Cut the cost of your rent
If you’re currently renting, you can find several ways to free up some cash and save money. For example, if you’re renting a home with several bedrooms and a bigger space, you might need to downsize and look for a home with a size that’s just perfect for you. Also consider moving to a new location closer to the workplace so that you can save on the accommodation costs.
Cut back on the tiny luxuries
We don’t usually notice it but the little luxuries add up and impact our monthly budget in the long run. Try to think of the luxuries or the “wants” you usually buy on a daily basis. Do you have a habit of dropping by at your favorite cafe in the morning to grab an expensive cup of joe before work? Do you usually reward yourself with an expensive meal by the end of the week at a fine restaurant? While there is nothing wrong with giving yourself a treat, there are smarter ways to do it without paying a hefty price.
Open a savings account
Opening a savings account is another excellent way to grow your savings. Not only will it help you keep your savings in a secure place, but your savings can grow even bigger with the help of interest rates. Look for a financial institution that offers higher interest on savings, such as a credit union. Then, open an account and have your savings kept there so you won’t be tempted to spend it elsewhere.
Look for ways to earn money on the side
Want to grow your savings faster? Try to look for other ways to earn money. Besides your regular job, there certainly are other ways to earn. Freelancing is very common nowadays and it offers vast opportunities to those who need additional income. Consider looking for part-time jobs online. Also, if you have special skills like photography or music, you can make use of these talents, too, to have an extra income.
Cancel services that are no longer needed
If you’re paying for a cable service but barely have time to watch TV, it might be a better idea to have it downgraded or canceled all together. Or, if you are paying for a gym subscription, you might want to end your membership and look for alternative ways to work out. The goal is to free up more cash by canceling subscriptions and services that you are not able to maximize anyway.
With the high costs associated with buying a house and paying for a mortgage deposit, saving up for these financial goals may seem like an uphill battle. However, with the help of these tips, you can start growing your savings in no time!
Looking forward to having a place you call your own? Learn more about the mortgage loan approval process by reaching out to Calcite Credit Union.