Once you have assessed how much you need for your downpayment, there’s still one major obstacle standing between you and your home!
That is the actual cash needed for your downpayment!
Just to be clear, the downpayment is the initial amount of money you need to pay when you purchase your home.
If you hope to become a homeowner in the near future, it’s wise to start saving immediately!
Here are 5 tips that can help you start piling on the cash for your new home!
1. Set up a separate savings account
You can set up a savings account specifically for downpayment of your home and keep it separated from the rest of your savings.
This method has multiple benefits!
When you set small achievable goals for your downpayment fund, such as saving $5,000 in the next 6 months, you can also easily monitor and track the progress of your fund.
Also, it prevents you from accidentally spending it as you can keep it out of sight.
The drawback is that if you own multiple savings accounts, you may lose out on additional interest rates compared to if you only had 1 savings account as some accounts require you to have a minimum amount to earn higher interest rates.
You can find bank accounts with high interest rates here!
2. Automate your savings
Having your savings automated is great way to save for your downpayment.
One strategy you can use is this:
Step 1: Open a savings account and a spending account.
Step 2: Tell your HR to transfer your salary is transferred to your savings account.
Step 3: Set up an automatic transfer system to transfer the amount you wish to set aside from your savings account to your spending account.
The reverse is also true, that means if your salary is transferred into your spending account, you can set up an automatic transfer system to transfer the amount you have planned to set aside to your savings account.
Alternatively, you can automate your saving through a short-term endowment plan from banks and insurance companies to help you save for your downpayment while earning decent interest.
You can choose a fixed amount or a specific percentage of each paycheck so you save more when you get a raise or bonus.
3. Save up extra cash
When you get bonuses, pay increments and angbao money, transfer these extra cash to your downpayment account instead of spending it all!
You’ll be surprised how much these extra cash can add up and how this simple act can achieve your goal faster!
4. Match your savings to your spending
This method is a really fun yet painful way of saving for your downpayment!
Every time you buy something you want instead of something you need, note the price of your purchase and transfer the same amount of money to your downpayment account.
This doubles your purchase price since it doubles the amount that leaves your savings account, which forces you to prioritize your downpayment over your other expenses.
5. Earn more interest
Accumulate your downpayment fund by transferring it into fixed deposits offered by banks or invest it in a Singapore Savings Bond! Both these instruments are really safe.
One difference between these two is that fixed deposits are less liquid than Singapore Savings Bonds.
This means that fixed deposits require you to save your money for a longer period of time (lock-in period) than a Singapore Savings Bond before you can withdraw the money.
These 2 instruments are great places for you to compound your downpayment.
Buying a house can be a life-changing event and sometimes require I good chunk of your savings, but if you have it all planned and started saving early, you’ll have an easier time to cope with the large amount of expenses that come with owning a home.
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