4 Tips On Saving For Your First Home
When you’re planning to purchase your first home getting your finances in order is one of the most important stages. To help you get the ball rolling, take a look at these four handy tips.
1 . Determine Your Budget
To establish your budget, you’ll need to determine how much of a mortgage you can afford. Typical mortgage payment guidelines suggest that, ‘the total amount you pay towards your mortgage should not exceed 28% of your gross (rather than net) income.’ You should ensure that the amount you spend on borrowing (in total), does not exceed 36% of your gross income. Investopedia advises that ‘most prospective homeowners can afford to finance a property that costs between two and two-and-a-half times their annual gross income.’
When you are applying for a mortgage, you’ll want to ensure that you can live comfortably. It’s unwise to choose a monthly repayment that will leave you struggling to pay your other expenses.
2 . Try Financial Apps
When you are in the process of saving what you need is a strict budget. There are several apps which can help you to save money, including:
- GoodBudget: The GoodBudget application helps you to create categories for your budget and then allocate an amount for each different category. The great thing about this financial app is that it helps you to plan out your spending, (as opposed to just monitoring your spending). It’s particularly useful for couples as you can sync both of your budgets.
- PocketGuard: This financial app helps you to link your accounts, bills, savings and loans all in one place. PocketGuard helps you to create a budget that works for you based on your lifestyle, spending habits, and how much you want to save.
- Cut Your Expenses
Simple but necessary, if you want to save a substantial amount of money you’ve got to cut your expenses. There are many ways that you can do this around the home, including:
- Green energy provider: Choosing a green energy provider can help you to save money on your bills each month.
- Pre-plan your meals: Meal planning can help you to make wiser spending choices, reduce waste and eat healthier.
- Go second-hand: Shopping at thrift stores can help you to make substantial savings on items around the home. To get started try apps such as Wallapop or Decluttr.
- Reduce Your Debts
When you’re preparing to buy your first home, it’s important to reduce your debts as much as you can. Getting your debts paid down first will speed up the process and improve your credit score. For a few techniques to reduce your debts, try the following options:
- Debt Snowball: With the debt snowball method, you start by paying off your smallest debt. Then, when the smallest debt is paid, you move on to the second smallest debt. The concept is that small debts are far easy to get rid of, and that small successes help to motivate you.
- Debt Avalanche: To master the debt avalanche method, you’ve got to make the minimum payment on each debt. Any extra funds you have should be paid towards the debt which has the highest interest rate. Once this is paid off, you move onto the debt with the second-highest rate.
Whether you’re looking for new condos or older townhouses, these four tips will get you well on your way to saving for your first property.