How to Pony Up for that Downpayment
Anyone looking to buy their own home must be able to afford it. It’s not just a matter of making the monthly mortgage payments, paying the utility bills and hiring maintenance workers. The biggest chunk of money involved in a property purchase is the down-payment.
More often than not, a down-payment entails plunking down tens of thousands of dollars in one go.
Most of us have been planning how our dream home would look like ever since we were young. However, not many of us have that kind of money lying around.
Therefore, get creative in thinking about ways to save for your down payment and move ahead with your purchase!
Ask for a Gift
A popular way for millennials to get their down-payment sorted is to ask their relatives for a cash gift. This is something that could be arranged in lieu of a birthday present, or maybe as an early wedding present.
It is important to make it clear right from the start that this is a gift rather than a loan. Otherwise, there could be lots of problems in the future when that relative perhaps expects the money back.
Overall, this is a fine way to enable yourself freely to buying a house. However, it can be difficult to get that conversation going.
Get a Loan from a Family Member
With that said, getting a loan is also considerable. But bear in mind that the more you borrow, the more it may impact your ability to pay back.
Ideally, your relatives will wait a while before you pay back the loan. That way you can get settled in and spend the cash on furniture and decor. Starting off this new life phase making loan payments certainly isn’t ideal for anyone.
A written contract between you and a relative might seem a bit over the top. However, it could save you a lot of hassle later on. This is to ensure that both sides are clear in terms of the repayment schedule.
People can forget details over time, leading to confusion and big problems if there is no mutual written agreement.
Get an Alternative Loan
There are other ways to borrow money for your down-payment such as getting an alternative loan.
Firstly, make sure that your lender is alright with this. If they are, and the loan is within your capacity then it could be just what you need.
If you are going to use a loan that carries a high-interest rate, plan to how to pay it back efficiently. It is vital to understand from the very beginning how you will pay this back – in addition to making your mortgage payments.
Cut Back on Your Spending
Is it worth living a more austere life for a year or so in order to save up for a down-payment more quickly? Logic would tell you that eating out less often and buying fewer clothes may leave you with more money. It won’t be a huge amount of fun, but it could be a foundation that makes you grateful for the rest of your life.
A good way to successfully cut back on spending is to calculate at the very start how much you want to save and figure out how to achieve that. Maybe you need to save a certain amount each month in order to accrue a certain level of down-payment.
By tracking your spending and your savings, you can keep your expenditures under control and stay motivated to carry on saving for as long as it takes.
This might even lend you a new impetus to lead a frugal lifestyle that can benefit you for the rest of your life. Saving money is always a great habit to get into no matter what life stage you’re in.
Use CPF Savings
In Singapore, it’s possible to apply a certain amount of your CPF savings towards purchasing a house. Note that there are withdrawal limits that cap the amount you can use depending on property types.
In such a case, there is a cap in place which goes by the name of Withdrawal Limit. In 2017, this cap is set at 120% of the Valuation Limit of the property being bought. However, the exact amount of CPF savings you can use depends on the type of purchase and your age.
It is also worth bearing in mind that you can use these savings only for either a freehold property or a leasehold. If you want to work out exactly how much you can use of your savings, you can find a handy calculator at the CPF website.Recommend0 recommendationsPublished in