How to save for a down payment

What is a down payment?

Most times intending home buyers are faced with the question of how to save for a down payment. A down payment a sum a buyer pays upfront when purchasing a home or car and is a percentage of the total purchase price. A down payment can significantly reduce the amount the borrower owes to the lender, the amount of interest they will pay over the life of the loan, and monthly payment amounts.

Typically, lenders require a minimum down payment, often 3% of the purchase price. The average first-time home buyer pays 6% of the home price as their down payment. A 20% down payment is ideal because it increases the chances of mortgage approval and reduces monthly payments. In this blog post we will be discussing some tips for saving for a down payment

Automate your savings

One of the best things you can do to save for a home down payment is to automate your savings. You can automate your savings by setting up automatic transfers to your savings account, set your mobile apps on automatic savings and so on. There are so many apps out there you can use to automate your savings, examples are Piggyvest, Opay, Optimus and many more.

Cut down expenses

If you want to save for a home down payment, you may need to make some sacrifices. Try as much as you can to cut down your expenses. This may be difficult especially if you were used to satisfying all your needs. Cutting or eliminating expenses can be a great way to free up money for your savings goal.

Get a side hustle

If you’re serious about saving for a home down payment, you may want to consider getting a side hustle. Think about a side job to earn extra income, whether it’s in the gig economy, like working at weekends or in the evening after your day job. This will help you save some money to pay for your down payment.

Monitor your spending

With online banking, keeping an eye on your spending is easier than ever. Track where most of your discretionary income is going. The best way to monitor your sending is to create a budget. Creating a budget helps you to monitor your finance and reduce unnecessary spending.

Consider downsizing

If you are saving for a down payment you may have to consider downsizing. Probably as a renter, chances are that your rent payments are your biggest monthly expense. Downsizing your current space may help you put away more money each month for the down payment.

What is a down payment?

Why down payment should be adapted