No matter how good it is or how perfectly it fits into your budget, the rental roof is, after all, something you can never call your own. Also, with the rising rental rate, it is always a smarter idea to buy a house than to live in a rented apartment. Not only is it your property, but it is also a permanent solution and an excellent investment for your family and future generations as well.
However, despite bank loans being readily available, an individual is expected to have a certain amount of their own saved up, apart from the loan amount. The amount paid-up from one’s amount is the ‘Down payment’.
The amount of money the customer puts into the down payment dictates the home loan amount by the customer that avails from the bank, and by default, the customer needs to repay at the rate of interest to the bank down the line.
A down payment is the percentage of the house’s value that the individual puts down without the assistance of a home loan or mortgage. The down payment amount is used for the costs up and above the property value.
Saving for a down payment, that too on a fixed income, however, can be daunting if the individual does not have a structured plan in mind. Listed below are a few tips that can help one save up for one’s dream home.
1) Try to Use Money Instead Of A Card.
While using a credit or debit card may seem more natural, it can cause a person to spend more than he or she would if they paid for a particular item using cash. Dr Drazen Prelec, an expert on the psychology of spending, states that the use of the credit card disconnects the link between the consumption transaction, which is pleasant and the unpleasant payment transaction. By using money instead of a credit card, the amount of money that the individual spends monthly will reduce drastically.
2) Try to Work On The Weekend
Buying a house with a standard, fixed income, is not comfortable. Working on the weekends or one’s day off will, therefore, benefit the individual in the long run. Extra work will provide a consistent secondary income which can entirely go towards the individual’s down payment.
3) Repurpose Old Belongings.
Anything that is not needed – from old clothes to old furniture can be sold off. On websites like Quikr, on an average, a piece of old furniture can be sold at a price ranging from Rs. 2,500 to Rs. 10,000. The amount may not seem like a significant source of income. However, every penny counts.
4) Save Wherever Possible
Cutting down on any expenditure which is not essential will go a long way in helping the individual save for down payment. A potential home buyer can apply the thought process to multiples avenues of expenditure ranging from the entertainment expenditure (the amount an individual pays on movies, at restaurants etc.) to the amount an individual pays for fuel monthly when compared to the amount he or she would pay by availing of public transport.
5) Invest in SIP
A SIP, or a Smart Investment Plan, is a great idea to save up for your dream home. With a SIP, every month, a fixed amount from your salary gets deducted and saved for future use. This amount multiplied with interest that added at regular intervals, and there! You have a consolidated amount in hand which you can use for your downpayment.
After the payment of the down payment, one can fulfil the other formalities and step into your own home! The next step would be to pay off the EMI of the bank loan.