Planning to buy your first home but confused about how to save money for a house in the next 6 months? Well, buying first property is a hectic task as you have to consider a lot of things.
It is always good to plan 6 months before buying a property as it will give you sufficient time to do research about the location, mortgage broker, loan interest rate and finally to save for a downpayment.
Well, it might seem like a lot of work if you are buying a home in 6 months which is true. It is also crucial to have good financial habits before considering investing such a huge amount in Real Estate.
So, let’s understand what strategies and tools you can use to save money for a house in 6 months.
How To Save Money For A House Fast?
Before starting to save money for your new property, you must first analyze the value of the property you will be targeting.
You need to do research about the current real estate market value to understand the growth of your investment in the next 5 to 10 years.
In the initial days of your research, you need to find a location which is high in demand but the rates of property are low as well as the upcoming projects in that area which will also increase the property value in future.
The reason behind this research is to understand the migration of people to your new property’s location. As you might have plans to rent the property in future to a nice tenant.
Now, let’s move to the crucial part which is saving money in 6 months that will help you pay the down payment and other miscellaneous expenses.
12 Steps To Save Money For House In 6 Months
Decide Your Down Payment
The first step to buying a house is to save enough money for a down payment. I know it is very difficult to save $50K in 6 months but if you can follow some strategies and plan then it is not that difficult to pay a hefty amount in the down payment which will save you thousands of dollars in interest.
While making a plan for your home, it is crucial to consider your current financial position. Your current financial condition includes the savings you have in your bank account, the line of credit you can get and how much loan the bank is offering.
On the side, I highly recommend you work on your credit card score. As you know, a better credit card score will reduce your interest rate by .30 to .40 percent which may not look huge but do that calculation with a million-dollar house.
You will save $3,000 to $4,000 yearly if you maintain a good credit score. Credit Repair Cloud, DisputeBee and Client Dispute Manager are some of the best credit-building software.
Make Your Monthly Budget
I know it is tough to set a new monthly goal where you need to cut a lot of expenses and leave below your means. But the target to save money for a house in 6 months will need an aggressive saving structure.
Every single penny you save now will create a huge difference in your savings after 6 months. You need to have a clear vision while making your budget for the next six months.
Personally, I prefer using the Excel sheet to note down every single expenses that I have every month. After writing my expenses, I try to understand what do I need and what not which reduces almost 15 to 20% of my overall expenses.
For example, I spent over $12 on Starbuck Coffee and $5 to $7 on bagels or donuts every day. That means I spent over $600 every month on things that are not essential in my daily life. I got to know that when I started using an excel sheet to write my expenses.
So, You can see that nobody teaches me to do budgeting and save but it was my idea to write my expenses to understand where I am losing the most.
Pay of Your Credit Bills
If you have a pile of debt on your credit card then the first step you can take now is to pay off your credit bills. This will help you save money on the interest that you are paying annually and at the same time help you in building your credit score.
As you know that banks deduct a minimum amount from your bank every month as a credit card minimum usage payment. But it does not make a huge difference to your credit card available balance as the bank charges the interest rate that you are paying every month.
And in order to apply for a loan, the bank will ask you to clear off your credit card debt or it will not qualify your loan application. Well, this is absolutely true. The bank does reject the application after checking your credit card transaction record.
Therefore, it is very important to keep and pay your credit bills or debts on time so as not to find yourself in a bad situation while putting in an application for a home loan.
Reduce Your Bad Habit
Everyone has some kind of bad habit which eats a major chunk of their monthly income. That can be unnecessary shopping or eating outside all the time.
To reduce your expenses while shopping, you can simply unsubscribe from these companies’ email marketing campaigns. This will help you to avoid getting any updates on the latest offer and deals.
And if you are a foodie who loves to eat outside then you can also start cooking a few meals every week just to save money from those hefty restaurant bills.
Initially, you may find it challenging but with time you will get used to this process of managing your finances.
Ask For A Salary Raise
Asking for a raise can be very intimidating and a lot of employees even feel shy while asking for a raise. But you can do research about your current role’s demand and see what the average salary is in the market.
Based on the research, you can ask your boss directly or by email to raise your salary. The best time to ask for a raise can be during the annual review of the employee’s work. Try to avoid asking for a raise if there is any problem or during a crucial project in the company.
This hike in salary will increase your saving which can be used as a down payment for your next house.
Skip A Vacation
Exploring a new location, culture and history is an exciting thing but it requires a lot of money while planning a trip to France or Italy. It is also seen that Older people tend to spend more on vacation compared to younger people.
On average, a family of four will spend $5,000 to $6,000 every trip which is definitely a huge amount. You can explore all this culture in your country whether it’s the USA, Canada, UK or Australia.
You can visit a museum or an exotic location in your city. You can also enjoy spas, trekking, diving and many more if you are living near beaches. This will help you save at least $3,000 to $4,000 which you can use in your house down payment.
Borrow From RRSP
You can borrow up to $25,000 from your RRSP account. RRSP is also known as Registered Retired Saving Plan which can help you to save money tax-free.
RRSP allows you to contribute to your savings where the tax will only be paid if you withdraw the amount. You can withdraw $25,000 and use it as a down payment for the house which of course needs to return in 15 years.
The major benefit of RRSPs is the tax credits that you get if you keep on saving a particular amount of your income every year.
Lastly, it is crucial to return back the withdrawal amount to RRSP in 15 years. Or else, it will be treated as income on which you have to pay taxes. Also, consult your account or financial advisor to check whether this option is worth it or not.
Setup A Separate Bank Account
If you are planning to save a huge chunk of the amount for a particular goal, setting up a separate bank account will be your saviour. Here, you will transfer a particular amount each month.
This process will avoid any temptation to buy things unnecessarily or to withdraw for emergencies which aren’t really emergencies.
It is crucial to put money somewhere that you will not able to access all the time. The harder it is to withdraw money, the more you can save it. You can also choose some options like shares and stock which might sound great.
Of course, it is tempting to listen but I will not encourage you to put any money in shares and stocks as you can lose the value of your funds in case of any market crash.
Recognizing Your Financing Options
When you are planning to buy a property, it is very important to consult a mortgage specialist or broker to find the details for the loan that you can qualify for.
Countries like Canada and USA offer different home buyer plans where the federal government made it easy for the people to buy their property.
You can purchase a property in possibly less than six months due to the wide range of loans available and their diverse down payment rates. Depending on your credit card history, the location of the home, and other factors, there are banks that can help you qualify for a mortgage with a 5% down payment.
The federal government in nations like Canada and the USA offers a variety of home buyer schemes that make it simple for consumers to purchase real estate.
To qualify for your dream home, I will encourage you to consult your accountant or financial advisor.
Rent Extra Space
Do you own a house or apartment which have an extra room or space? If yes, then you can consider using different hospitality websites like Airbnb to put your space for rent.
Airbnb allows you to approve the dates and guests as per the availability of your room or space. You can also block a few dates if your friends or family members are visiting.
On average, an Airbnb House owner makes around $2,500 to $3,000 per month after excluding expenses. But you also need to remember that the quality of the place and location plays a huge role while putting a price tag on every night.
Automate Your Savings
If you find it hard to save money and spent a major chunk of your pay cheque on food and Shopping. Then setting up an automatic payment to your current account will help to save more. You can set up your automatic payment on a weekly or monthly basis depending on the date of your pay cheque.
Or else you can ask your HR to separately transfer a few percent of your total income into your new bank account. As your first priority is not to put money into your regular but into your saving account which you will not be able to access all the time.
I know you do have an option to do it manually but you might reduce some amount in order to buy one of the latest products of your favourite brand. So, just set up the automatic payment with your bank or HR Team.
Start A Side Hustle To Make Extra Money
As you know, there is a limit to how much you can save with a full-time job. It’s always worth considering some side hustle options to get extra income to increase your home savings goals.
Some people might look at it as part-time where they will consider working night or day shifts for two to three days per week at their favourite restaurant or shopping mall. But there are opportunities too where you do not need to look for a job at your favourite place.
You can start offering freelance or consulting services in your preferred niche. Having a side hustle, or at least a passive way to make money, is very important to get through such immediate planning.
I believe that you can now get the idea that what are the most crucial steps that you must need to follow if you want to save money to buy a house in 6 months.
There is no hard and fast rule to saving money for a house but the thing that matters the most is the discipline that makes you save money each month. I have also mentioned some ideas that you follow while making your next month’s budget.
The budget is one pillar of your saving plan. The other pillars are the interest on the loan, location of the property and your mortgage broker. While selecting a property, a broker players a huge role as he/she have the data to understand the market potential of that particular location in the next 5 or 10 years.
To wrap up, I highly recommend you to plan slowly but perfectly as buying a house is a huge decision because you will be putting millions at risk. All the Best!