Last Updated on 05/08/2020 by Steve Wanjie
A home house down payment what is it? And why is a home house deposit so important?
If you can’t pay cash for your home you take a loan. You take a home loan otherwise known as a mortgage. A home house down payment is the money you pay to your lender (or bank) to access a home loan. It is a percentage of the cost of the house. The percentage is between 5 to 20%.
A home house down payment is important because you prove to the lender that you are responsible. It proves that you are capable of repaying your home loan. The home deposit acts as insurance to the lender.
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Here are some tips to help save for home mortgage if you can’t buy in cash.
1. Rank homeownership at the very top of your value list
You need to get laser-focused to save for your dream home house. Your value system when it comes to spending your money must be on point.
To qualify for a mortgage (home loan) you need to pay a down payment to your lender (or bank.) This is the reason so many people around the world can’t own a house. They are unable to raise a down payment. How are you going to handle your down payment need? How will you save? Read on!
You need to put saving for your home deposit (down payment) on the top of your priority list. Make it number one. It’s the most important investment you will ever make in your life.
2. Create a home house down payment account – Prove to Bankers that you are responsible
Why do mortgage lenders ask for a down payment? They ask for a home deposit because they want to know whether you are responsible. If you can’t raise a down payment you are irresponsible. That is the truth.
If you are responsible enough to save for house loan, the banker is willing to give you a homeownership deal. So start saving now.
What to do? Create a home loan account and start saving monthly. This action will create a financial statement to show to your banker. That does prove financial responsibility on your part.
This is the most convenient way to save for a house deposit. Commit never to touch savings in this account until you’ve raised enough to pay a home deposit.
3. Make life simple – cut some expenses to save for a home house down payment
You can choose to simplify your life. Try to bring down your monthly expense bill to create forced savings for a home deposit. Sacrifice now for a better tomorrow. There is nothing wrong with skipping vacations for two years. There is nothing wrong with eating homemade food. Instead of dining in expensive restaurants. Lower your expenses. That is what I’m trying to say to you, my friend.
Which are the best savings accounts to raise home down payment?
Here is an example:
Money market fund – this is an account that will be making you money. Your money will not be idle. It will be working for you. Thus, the money grows.
How much should you save for a home deposit?
The best down payment is 20% of the cash price of the house. This affords you a good deal from your bank. Less than that is not friendly to you. It will cost you more if you put 10% down. It’s more expensive because you will be paying for private mortgage insurance. And you don’t want that.
3. Make it a challenge – a game – to build a home house down payment fund
Create different money-saving challenges for you. Make saving for a home a fun game. This will shorten the period for saving. One month you could choose to play around with monthly bills. Can you find a creative way to lower them? Can you skip lunch once a week and put the savings in your home down payment account at the end of the month.
The more creative ways you find, the more enjoyable and fulfilling it feels. There is nothing as sweet as having a feeling of financial freedom. The money set aside as it grows, the better you feel. You become confident as the money grows.
4. Save extra and unexpected income for a home house down payment
You will always get some unexpected income. This could be Christmas money, bonus money, tax returns, or pay increments at work. Any unexpected income put aside. Put it in the home down payment account.
5. Create extra income streams to save for a home house down payment
To speed up the process of saving for a home, you should create new income streams. Extra income channel means more money for your home savings account. You are able to save more. Find simple ways of generating more income.
Look for freelance tasks online. Work overtime at your place of work to increase your monthly income. You may choose to start a small business. All it takes is creativity and focus. Work smart to increase your income capacity.
6. Put it in your monthly budget to save for a home house down payment
The best way to superior financial management is to have a monthly and yearly budget in place. Money management isn’t easy. The reason many people retire into poverty is a failure to manage their finances the right way.
To save for a home deposit put it in your budget as the first item. Automate the payments so you don’t have to pay it yourself. From your paycheck to your home deposit account.
7. Become creative with your current rent expense
You could decide to downgrade your rent bill by moving into a cheaper neighborhood. The savings go straight into your home savings account. Rent for cheap and save up.
But you could move in with a roommate if you are single. This will reduce your rent bill and the saving period for a home house down payment.
You could choose to move in with your parents if you are single. They will understand. If you married and living in a country like the USA move in with your in-laws.
8. Sell or rent stuff to raise money for a home house downpayment
There is always something you can sell to raise money. Something you don’t need in your household could bring in money. Whatever it is sell it. If you have two cars sell one. Clothes that you don’t wear anymore. Sell stuff raise money for your home deposit.
If you don’t want to sell it rent it to make extra money. There might be a spare room in your house. Rent it. You can rent your car. Be creative to raise money. There are services like eBay, Jumia, Craiglist, amazon, and Jiji. These allow you to sell second-hand items.
Airbnb will help you find a tenant for an empty room in your house. And you could make your car a taxi. So, you have many options to make extra cash.
9. Other ways of raising a home house down payment
· Use your savings
· Borrow from family and friends
· Monetary gift from parents, siblings or friends
· Income from investments or stocks
A home house down payment saving is an important undertaking. Because it’s the first step into homeownership. Start now. Not tomorrow.
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Steve Wanjie is a digital marketing specialist, SEO Expert, expert article writer, blogger, sex educationist, and businessman. He is the founder of Dijito Marketing and Laikipo.com. He works and lives in Nairobi Kenya.