• Home
No Result
View All Result
Money Monarch
  • Make Money
  • Money Management
  • Banking
  • Investing
  • Lifestyle
  • Real Estate
Money Monarch
  • Make Money
    • All
    • Make Money Apps
    • Make Money Online
    • Side Hustles
    • Work From Home
    68 Ways To Make Money Quickly In Multiple Sectors During 2020

    68 Ways To Make Money Quickly In Multiple Sectors During 2020

    23 Ideas For Kids And Teenagers To Make Money

    23 Ideas For Kids And Teenagers To Make Money

    I need money now

    23 Ways To Make Quick Cash When You Need Money Now

    make money driving for uber

    How To Make Extra Money Driving For Uber

    online jobs for teens

    13 Best Online Jobs For Teens To Make Real Money

    8 Places To Get Paid To Test Websites From Your Home Couch

    8 Places To Get Paid To Test Websites From Your Home Couch

    stay at home mother

    9 Best Stay At Home Mom Jobs To See Your Kids

    hobbies that make money

    16 Hobbies That Make You Money To Start Today

    create passive income with no money

    How to Create Passive Income With Zero Money

  • Banking
    • All
    • Certificates of Deposits
    • Checking Accounts
    • Savings Accounts
    Meet Credit Karma Savings – A New High Yield Savings Account With Even More Perks

    Meet Credit Karma Savings – A New High Yield Savings Account With Even More Perks

    woman writing about a money order

    How To Fill Out A Money Order Step by Step

    checkbook for checking account

    What Is A Checking Account?

    piggy bank savings account

    What Is A Savings Account And When Should You Use One?

    cd ladder money

    What Is A CD Ladder – Should You Get One?

    switch bank meeting

    How To Switch Banks Without Missing Any Payments

    what is direct deposit

    Direct Deposit – What Is It?

    Radius bank high yield account

    Radius Bank High Yield Savings Account Review: What You Should Know

    Checking Accounts Versus Savings Accounts: Similarities And Differences

    Checking Accounts Versus Savings Accounts: Similarities And Differences

  • Investing
    What Is A Bear Market?

    What Is A Bear Market?

    Stash App Review – What You Must Know Before Investing

    Stash App Review – What You Must Know Before Investing

    stock gift

    How to Give Kids A Share Of Stock (Christmas Gifts Or Other Holidays)

    Titan invest banner

    Titan Invest Review – Algorithm Investing Like A Hedge Fund

    thinking about betterment

    Betterment Review: Safe Investing With Robo Advisors?

    best short term investments

    8 Best Short Term Investments To Grow Your Money

    happy acorns review

    Acorns Review – Investing Spare Change With An App

    fundrise review apartment buildings

    Fundrise Review: Real Estate Crowdfunding Made Simple

    M1 Finance Review – The Greatest Way To Invest With “Pies”

    M1 Finance Review – The Greatest Way To Invest With “Pies”

  • Money Management
    68 Ways To Make Money Quickly In Multiple Sectors During 2020

    68 Ways To Make Money Quickly In Multiple Sectors During 2020

    Earny Review: The App That Monitors Price Matching And Price Drops

    Earny Review: The App That Monitors Price Matching And Price Drops

    What Is A Bear Market?

    What Is A Bear Market?

    12 Best Coupon Websites To Save The Most Money

    12 Best Coupon Websites To Save The Most Money

    Groupon Review – Online Discounts Without Clipping Coupons

    Groupon Review – Online Discounts Without Clipping Coupons

    filling up discounted gas

    16 Best Ways To Get Free Gas Cards and Discounted Gas

    how to get out of debt guide

    How to Get Out of Debt (Step By Step Guide 2020)

    Charlie Review – Text Message Budgeting Assistant

    Charlie Review – Text Message Budgeting Assistant

    on phone getting a personal loan

    How To Get A Personal Loan (Where To Look To Find One)

  • Real Estate
    buildium review

    Buildium Review – Is It Worth The Money?

    best property management software

    The Best Property Management Software (Ultimate Guide)

    13 Steps To Buy A House For The First Time

    13 Steps To Buy A House For The First Time

    3 Ways To Make 50K A Year Without Working (Using Passive Income)

    3 Ways To Make 50K A Year Without Working (Using Passive Income)

    how renters can save a house down payment

    7 Ways For Renters To Save For A Down Payment

    7 Ways For Renters To Save A Down Payment For A House

    7 Ways For Renters To Save A Down Payment For A House

No Result
View All Result
Money Monarch
No Result
View All Result
Home Money Management

7 Ways For Renters To Save For A Down Payment

Money Monarch by Money Monarch
December 18, 2019
in Money Management, Real Estate
0
This article may contain references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. For an explanation of our Advertising Policy, visit this page.
0
SHARES
357
VIEWS
Share on FacebookShare on Twitter

So You Decided To Save For a Down Payment?.. But How?

There comes a time in your life where you‘re ready to move out of the simple yet frustrating world of landlords, leases, and security deposits and into your own home.

Now, getting a home of your own isn’t a cheap endeavor.

There are numerous expenses to consider (like mortgage, property taxes, upkeep costs, etc.)

But there’s one cost you have to take care of before you even think of those other costs:

The down payment.

Typically, most people take a about 5 years to save up the down payment for their house.

Why so long?

Well, you’re about to find out.

How Much Should My Down Payment Be?

There isn’t one strict guideline for down payment amounts.

You can theoretically put as little as 3% down on a house. If you’re getting a $200,000 house, that’s only $6,000.

Usually that only happens with excellent credit or through special programs.

However, a good rule of thumb is 20% of the total costs of the house for a few reason:

  • Liked by lenders – For some reason, your lender will like you more if you put down 20%.
  • Lower fees – Lenders will lower both upfront and ongoing fees if you put down 20%
  • Lower payment – Just like a car. The more you put down, the less principal amount you’ll have to pay off each month.
  • Lower interest rate – A higher down payment means a smaller mortgage. A smaller mortgage means the creditor lends you less money, which means less of their money is at risk. To reward you, they drop your interest rate a bit. Combine a lower interest rate with a smaller mortgage, and the savings will be immense.
  • No private mortgage insurance – Small down payments imply more risk of being unable to pay off the house in full, meaning most creditors will require you to pay for mortgage insurance to offset the risk. At this point, it doesn’t make much financial sense to skimp on your down payment.
  • Equity – Putting 20% down means ⅕ of the house is already yours.

By now, you’re probably noticing how disadvantageous it is to put down a tiny payment on your house.

You’ll make up the savings by paying a small fortune in higher mortgage payments, more interest, and mortgage insurance.

So we highly recommend you put a more significant amount of money down on your house.

Now, 20% down on a $200,000 house is $40,000; As you can see, the optimal down payment will be a whole lot of money.

That’ why people take half a decade (and sometimes longer) just to pay the down payment.

That being said, it’s important to follow each of the following steps closely if you’re serious about buying a house.

Make A Budget (And A Goal) ASAP

Budgeting is the foundation for any large financial goals.

In fact, it precedes every other tip in this article.

Without a budget, you won’t be able to find numerous ways to cut expenses and put more aside for your down payment.

In addition to your budget, you need to have a down payment goal involving two things:

  • Amount of down payment
  • Date to have down payment

Setting a goal with hard targets helps keep you accountable

Along the way, you’ll want to set mini goals as well to stay on track.

It’s generally much easier to reach a big goal when you break it down into small, quickly-achievable goals.

All you have to do is meet each of those small goals and before you know it, you’ll have your entire down payment ready to go.

There are many budgeting apps out there to streamline your budgeting experience, but Mint is one of the best.

Not only can you set detailed budgets, but you can also tell Mint your specific financial goals and it will provide you guidance.

Relentlessly Cut Your Expenses

With a budget in hand, it’s time to hack and slash at your expenses.

The earlier you’re able to do this, the better because you’ll be able to save more money AND you’ll be able to apply the other tips more easily.

Random/Unnecessary Spending

To start, take a look at your random/unnecessary spending. Immediately cut out any obvious unnecessary spending, such as expensive bar trips or fancy restaurants.

Subscription-Based Services

From there, look at the subscription-based services you pay for.

Chances are, you’re paying for something you don’t even use!

And even for the subscription services you DO use, find ways to cut your payments on those.

For example, you might be paying for Netflix’s top plan in order to access HD streaming.

But do you really need that?

Consider downgrading to a lower level; it’ll only save you a few bucks a month, but use this tactic with your other subscription services (and combine this general advice with you other expense slashing) and you’ll end up with a good chunk of extra change each month.

Essential Expenses

Finally, see if you can cut down any essential expenses.

This won’t be possible with 100% fixed expenses like rent, but there are some regular expenses that you can trim down:

  • Utilities
  • Gas
  • Groceries

Once you’ve slashed your expenses to the max, you have a few choices:

  • Put the extra money directly towards your down payment
  • Pay down debt
  • Invest the money

Whatever you do with the extra money, make sure it helps you inch closer to your down payment.

Want more in-depth guidance for tracking and cutting expenses?

Click here to read a comprehensive guide to tracking and reducing your expenses.

Auto Transfer To A Savings Account (Shorter Timeframe)

When you’re saving aside significant amounts of money each month for such a long period of time, temptation can creep in.

To combat this, open a brand new savings account built specifically for saving for a down payment.

Then, set up an auto transfer for each month in an amount that will allow you to reach your goal on time.

That way, you won’t even have to think about your savings until one day your account is down-payment sized.

If you can, try to find a high-yield savings account. The interest won’t make that much of a difference, but 2% interest (a relatively high savings APY) is way better than 0.01% interest!

Think about it: let’s say you’re buying that $200,000 house we mentioned earlier and plan on putting 20% ($40,000) down. Let’s also say that your savings is at $35,000.

You’ll earn $700 a year based on a 2% APY, which is nothing to laugh at!

Not to mention the fact that your interest will compound (aka add on to the total amount in your down payment savings account).

All of this will slightly speed up the down payment savings process.

Savings accounts are good if you have a shorter time frame to save for your down payment since they’re simple and not volatile.

If you don’t plan on getting your house for a very long time, consider the next option instead.

Invest (Longer Timeframe)

Stocks and other investment assets tend to be more volatile than bank accounts, but they also tend to yield better gains.

If your house purchase is way off on the horizon, consider investing your money instead of just dropping it at the bank.

Depending on your portfolio, you’ll reap a nice mix of capital gains and dividends from your efforts.

Don’t do this alone, though; work with a financial advisor. It’s their job to help people like you plan for massive financial goals like home ownership, and they’ll show you exactly how to invest based on your goals.

Pay Off All Your Other Debts

Unnecessary debt steals money you could be putting towards your down payment.

This is especially true if it’s not “positive” debt that does something productive, such as a mortgage.

Focus on eliminating your highest-interest debt first; this is usually credit card debt.

Credit card debt is also a good target because the amount of debt is usually easier to pay off.

Once those credit cards are under control,  redirect the savings towards your down payment.

If you have any small loans, try to pay those off too.

However, some cost/benefit analysis might be of benefit here.

Bigger loans can’t be paid off more quickly without putting your entire paycheck towards them; if you do this, you’ll have nothing left to save for your down payment!

It might make sense to maintain your normal payment on these and eliminate smaller, higher-interest debt.

Increase Your Income When Possible

Increasing your income takes more time and effort relative to your return.

Since you have such a significant dollar figure to hit, focus on things you can optimize relatively quickly. (budgeting, slashing expenses, debt elimination, etc.)

But once you’ve done all the immediate things, look for ways to bring in some extra income such as

  • Negotiating for a raise
  • Landing a higher-paying job
  • Small side jobs (like walking dogs)
  • Freelancing

All of these are quite easy to start and don’t take too much effort.

Also, the benefits of increasing your income will extend beyond the down payment; after all, mortgage payments aren’t cheap either.

Putting in the work now for higher income later will pay off once you’re all settled in (no pun intended).

Save Your Windfalls

It’s very tempting to spend irregular earnings (such as Christmas gifts or money found on the ground) on unnecessary purchases.

But you have a down payment to make, so why not put this money towards that?

To ensure down payment savings success, top off your savings account with this money or use it to get rid of debt.

Are You A Veteran?

If you’re a veteran, your country wants to thank you in the form of housing payment assistance.

The VA offers mortgage loans with 0 down payment, but they aren’t the only option.

There are tons of veteran housing assistance programs at the local, state, and federal level to help you afford the house of your dreams.

Final Thoughts

Putting down a large down payment (like 20%) is critical to avoid various fees, reduce your monthly payment, and give you a nice amount of equity right off the bat.

However, these down payment amounts are also quite large; you could end up putting down enough money to buy yourself a new car!

Make sure to budget and plan well ahead of time.

Slash your expenses, eliminate costly debt, and boost your income whenever possible.

Now, each part of saving for a down payment isn’t significant in it’s own right; but put them all together, and the process will take a lot less time.

Before you know it, you’ll be ready to get your own house!

As with any large financial goal, find a qualified financial advisor as early in the process as possible; it might cost you time and money, but their whole job is based on your success.

They’ll do a number of things for you:

  • Help you solidify your goal
  • Help you create your plan
  • Identify tax-efficient investment opportunities
  • Identify other great investment opportunities based on your individual needs
  • Give you other guidance and support on your journey

Oh, and they aren’t as big a time commitment as you think: meeting with your financial advisor on a quarterly basis should be plenty to ensure you’re on track to owning your own home.

Lastly, don’t give these habits up the moment you walk through the front door of your new home because you now have a house to maintain.

That means mortgage payments, constant upkeep, and decorating the place to make it your own.

Maintaining the habits you established on the way towards saving for your down payment will ensure you live happily ever after (at least financially) when you finally settle in to your new home.

Previous Post

How To Find A Financial Advisor That Actually Helps You

Next Post

Radius Bank High Yield Savings Account Review: What You Should Know

Money Monarch

Money Monarch

Money Monarch is a team that is in love with personal finance. We are on a mission to help you make the crucial decisions that will outline your financial future.

Next Post
Radius bank high yield account

Radius Bank High Yield Savings Account Review: What You Should Know

donating plasma doctor visit

How Much is My Plasma Worth? Ultimate Guide to Selling Plasma for Money

what is direct deposit

Direct Deposit - What Is It?

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Follow Money Monarch

  • 8 Followers

Popular Post

  • donating plasma doctor visit

    How Much is My Plasma Worth? Ultimate Guide to Selling Plasma for Money

    0 shares
    Share 0 Tweet 0
  • The Ultimate List of Blog Income Reports (100 Bloggers to Follow)

    11 shares
    Share 0 Tweet 0
  • 16 Places To Get Free Furniture For Your Home Or Apartment

    0 shares
    Share 0 Tweet 0
  • 16 Places To Sell Used Furniture For Cash

    0 shares
    Share 0 Tweet 0
  • 13 Ways Nurses Can Make Extra Money From Home

    0 shares
    Share 0 Tweet 0

Follow Our Page

Follow Us

  • Looking for freedom from your job? Want to work from anywhere in the world? Learn how you can earn a full-time income by getting paid to write - even start your own blog! #blogger #blogging #paidtowrite #sidehustle #entrepreneur #entrepreneurlife #makemoneyonline #quityourjob
  • Want to make your money work for you? We
  • Are you a single parent of working hard to support your whole family? We
  • Trying to pay off never ending student loans or high interest credit cards? Let us help! This article explains how to track expenses and earn extra income to help you achieve financial freedom! #studentloans #creditcarddebt #financialfreedom #finance #sidehustle
  • Your health is important! Get rewarded for eating right and working out - win up to $10,000!  #weightloss #fitness #healthylifestyle
Facebook Twitter Youtube Pinterest Instagram

Money Monarch is here to help you save and make more money at home while at the same time helping you get your finances right

Pages

  • Privacy Policy
  • Terms of Use
  • Contact Us
  • About Us

Recent Articles

3 Ways To Get A Free CarFax Report When Buying A Car

3 Ways To Get A Free CarFax Report When Buying A Car

June 17, 2020
Meet Credit Karma Savings – A New High Yield Savings Account With Even More Perks

Meet Credit Karma Savings – A New High Yield Savings Account With Even More Perks

June 17, 2020

© 2022 MoneyMonarch.com

No Result
View All Result
  • Make Money
  • Banking
  • Investing
  • Money Management
  • Real Estate

© 2022 MoneyMonarch.com