Do you dream of buying a home? How much money do you need to save for a house down payment in your legislation?<\/p>\n\n\n\n
Buying a home is one of the best investments you can make, despite fluctuations in pricing and shifts in the economy. It\u2019s like a long-term savings plan\u2014not only do you need to save for a house down payment, but any increase in value won\u2019t be taxable until you decide to sell.<\/p>\n\n\n\n
Here is how to create a feasible plan to save for a 20% house down payment.<\/p>\n\n\n\n\n\n\n\n
Building a cash reserve required for a house down payment is tough but people make it even harder by committing the following mistakes:<\/p>\n\n\n\n
Mistake #1: You Rent, but Don\u2019t Save for a Down payment<\/strong>. Renting often costs less than owning a house due to a lack of maintenance costs, but renters often don\u2019t put the difference into savings. Instead, while you rent, use the money that you would put toward maintenance to save for a house down payment.<\/p>\n\n\n\n Mistake #2: You Think the Housing Bubble<\/a> Needs to Break First<\/strong>. A housing bubble occurs when the prices of homes exceed their real value<\/a>. Australia is currently in one of the longest-lived housing bubbles in history, though recently, prices appear to be coming down.<\/p>\n\n\n\n Regardless of what the market does, saving for a house is worth the effort. You can\u2019t control when the bubble will burst, but you can<\/em> control your income and your savings. Once you\u2019ve saved enough (discussed later in this step), buying makes sense. Plus, Australia has some of the lowest interest rates in the world, so if you buy within your means, you have more than a good chance of paying off that debt.<\/p>\n\n\n\n Mistake #3: You Buy More Home Than You Can Afford<\/strong>. Buying more house than you can afford hampers your ability to pay it off in the long run. This can happen for several reasons:<\/p>\n\n\n\n To avoid these pitfalls, do the following:<\/p>\n\n\n\n Mistake #4: You Believe in Starter Homes<\/strong>. Some people think they can buy a less costly home and use the equity they build to buy a more expensive, long-term property later. In reality, this doesn\u2019t often work because the initial costs of buying a home are so great that it can take longer to recover than the time you\u2019re planning to live in the house. Instead, plan to buy a home that you\u2019ll live in long term, and consider investing in the additional property later.<\/p>\n\n\n\n Mistake #5: You Have a Rigid Vision of Where You Want to Live<\/strong>. You might think it\u2019s impossible to own a home because the cost of living in your ideal place of residence is too great. For example, an apartment near your city\u2019s trendy shopping district will likely cost more than one on the outskirts.<\/p>\n\n\n\n Consider an alternative: living in a place where you can afford a home, even if it\u2019s not exactly where you\u2019d envisioned. For example, in Melbourne, the price of apartments has become very reasonable in recent years because there are many available. Or, consider living within commuting distance of a city where it\u2019s often cheaper to purchase a home.<\/p>\n\n\n\n Ideally, you\u2019re aiming for a 20 percent deposit so you won\u2019t have to pay for lender\u2019s mortgage insurance, or LMI. (Shortform note: In the U.S., this is called private mortgage insurance, or PMI). Mortgage insurance has nothing to do with protecting your investment\u2014it\u2019s for the bank\u2019s peace of mind in case you default on your mortgage.<\/strong> There\u2019s really no good reason to pay it and by saving enough of a down payment, you won\u2019t have to.<\/p>\n\n\n\n Here are the steps: <\/p>\n\n\n\n 1. Calculate how long it will take you to save for a down payment.<\/strong> If you\u2019ve followed the steps, you\u2019re already directing 20 percent of your monthly income toward your Fire account.\u00a0<\/p>\n\n\n\n Assuming you and your partner each earn the average wage for Australia ($83,445 gross per person) your take-home pay is $5,250 per person, or $10,500 per month together. If you set aside 20 percent of your income toward saving for a home, you\u2019ll have enough for a $100,000 down payment in four years.<\/p>\n\n\n\n But it\u2019s possible to save enough faster if you save more. For example, if you live on one person\u2019s wages and put the other person\u2019s wages toward a down payment, you could save nearly a $100,000 deposit in just 19 months.<\/p>\n\n\n\n 2. Devise additional ways to save. <\/strong>Here are some options:<\/p>\n\n\n\n 3. When it\u2019s time to buy, aim for a home where the monthly payment will be less than 30 percent of your take-home pay. <\/strong>Any more, and you run the risk it will be hard to pay off. In addition to the list price, look at what homes have sold for in the neighborhood to get a sense of how much the home could ultimately sell for.<\/p>\n\n\n\n 4. Consider the following when choosing a mortgage and mortgage lender:<\/strong><\/p>\n\n\n\n Make a plan to save for a house.<\/p>\n\n\n\n Do you dream of buying a home? How much money do you need to save for a house down payment in your legislation? Buying a home is one of the best investments you can make, despite fluctuations in pricing and shifts in the economy. It\u2019s like a long-term savings plan\u2014not only do you need to save for a house down payment, but any increase in value won\u2019t be taxable until you decide to sell. Here is how to create a feasible plan to save for a 20% house down payment.<\/p>\n","protected":false},"author":7,"featured_media":32839,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[7,31],"tags":[267],"class_list":["post-32795","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-lifestyle","category-money","tag-the-barefoot-investor","","tg-column-two"],"yoast_head":"\n4 Steps to Save for a House Down Payment<\/h3>\n\n\n\n
Exercise: Save for a 20% House Down Payment<\/strong><\/h3>\n\n\n\n