Are you a tenant currently dreaming of buying your own house? If yes, you’ll probably want to know how to save for a home while renting. For many renters, owning your own property is something that can seem overwhelming. How can you possibly save money when you’re paying a large chunk of cash each month to rent a home?
The good news is that by being smarter with your money, you can start to save towards a down payment for a property of your own. In this article, we’ll reveal how to save for a home while renting using 9 easy steps. Plus, you can use these steps even if you’re on a low income.
Saving for a home can feel challenging at times, but by knowing how much you need to save and creating a savings goal, you can begin to work towards this exciting process.
How Much Money Do I Need to Save for A House?
The amount you need to save for a home while renting will depend on several factors, such as house prices where you live, your income, your personal circumstances, and the type of property you wish to purchase. However, there are a few aspects you can start to think about.
You can place a minimum of 3.5% of your new property’s value if you opt for a FHA (Federal Housing Association) loan and have a credit score of 580 or more. If your credit score is 500 to 579, you’ll need a 10% down payment.
A larger down payment can provide you with a better interest rate on your mortgage, a lower monthly mortgage payment, as well as giving you more home equity from the beginning. Whatever down payment you decide on, you can start to save towards it with our 9 easy steps.
1. Set A Monthly Budget
The first step to saving for a home is to set your savings goal and a monthly budget to work towards it. When considering your goal, it’s a good idea to remember that you’ll need to pay taxes, home inspections costs, and other fees, when you close a property deal. Additionally, you also have the cost of moving home so you may want to factor these fees into your savings goal. Once you’ve decided how much money you’re going to save, you can then create a monthly budget.
In your monthly budget, note down all of your expenses. Knowing how much you spend each month will help you to manage your money better. You’ll also discover how much money (if any) you have got left over to start saving.
2. Find A Better Bank Account
Placing your money in a high yield savings account will give you a better interest rate than a standard bank account. While it may not make a massive difference to your overall goal, every little bit helps when you’re saving.
A few high yield savings accounts which currently offer 0.50% interest and above include Vio Bank, Comenity Direct, and Ally Bank.
3. Get Cashback When You Spend
If you need to make essential purchases online, consider using a cashback platform. A website like Topcashback gives you money back when you make a purchase through their links. For example, if you made an order at Puma for $30 and a cashback site gave you back 10% of your purchase, you would receive $3 in your cashback account.
In addition to making purchases, you’ll also find cashback deals for hotel bookings, car rentals, and food takeout. Topcashback has over 4,000 retailers you can get cashback from which you can withdraw directly into your bank account.
4. Start A Side Hustle
If you’re struggling to limit your expenses, perhaps it’s time to start making more money. A side hustle is work you do in addition to your main job. The great thing about the internet is that there are many ways to make money online.
A few things you can do to start making money include:
- Selling your old things on eBay
- Answering surveys in exchange for cash
- Giving rides as an Uber driver
- Becoming a mystery shopper
- Selling a service on Fiverr
Fiverr is an excellent way to start earning money as you can sell any type of service on the platform, such as managing social media for clients, writing blog posts, and designing logos.
5. Lower Your Monthly Bills
Did you know that it’s possible to reduce your monthly bills? You can save money on your utility bills, television and internet expenses, as well as insurance. A bill reduction app, such as Billshark haggles with companies on your behalf to find you the very best savings. Plus, you’ll also be able to cancel any unused subscriptions.
You can also lower your expenses by switching to a cheaper car and only purchasing second-hand items. While these may seem like sacrifices, they’ll help you to save money for your down payment faster.
6. Look at Where You Can Save Money
When you created your monthly budget, you probably looked at ways you could save money. However, there may be factors you haven’t yet considered where you could make some savings. A few examples include:
- Purchasing instant coffee to make at home rather than buying a takeaway cup
- Taking your lunch to work rather than eating out
- Use discount coupons when grocery shopping
- Meal prep at home rather than going to a restaurant
- Invite friends over for social events at home
- Try to quit smoking and cut back on alcohol
- Use your local library for books and DVD’s
- Walk more instead of driving to cut down on gas
- Cut and color your own hair
7. Take A Vacation at Home
No matter how much money you’re trying to save, you’re going to get the travel bug itch at some point. It’s only natural to want to take a vacation. However, you can save money by vacationing at home.
To do this, look for free events in your nearest city. Maybe there are free museums, art galleries, or festivals you could attend? You could also go and explore local parks, farmer’s markets, discover the best views of your city, and much more. Research online to find out the most loved places in your area and create an itinerary to visit them.
8. Take A Look at Your Credit
If you have a lot of credit, you can reduce your monthly payments with a debt consolidation loan. This type of loan combines debts with high-interest into one single debt, normally with a low-interest rate. A consolidation loan isn’t for everyone so it’s essential to do your research and weigh up the different options available to you.
If you have credit card debt, you can reduce payments by moving your debt to a no-fee, balance transfer credit card. This means you move your debt from one credit card lender to another. However, a balance transfer credit card usually has a 0% introductory period, meaning you can pay off your debt faster, and save money as your monthly payments are smaller.
9. Consider Downsizing
If your rental costs are quite high, you may want to consider downsizing to a smaller property. You’ll save more money, helping you to reach your savings goal quicker. Moving often comes with added costs like furniture removal so it’s important to contemplate how much money you could save in the long run by downsizing.
Use Our 9 Steps to Start Making a Plan of Action
With our 9 straightforward steps, you now understand how to save for a home while renting. Even with minimal effort, you can use these steps to create a plan of action to save a good amount of money towards your savings goal. Remember, the key is consistency. If you take action and continue to stay motivated, you’ll soon have enough money saved for a down payment!