7 ways to save for a down payment on your home

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Getting together a deposit for that first house can be daunting, but small steps lead to realising the dream. (Rawpixel pic)

Those looking to buy their first home have options. The My First Home Scheme, for example, provides full financing via banks such as CIMB, Hong Leong Bank Bhd, RHB Bank Bhd and other financial institutions.

But those who do not qualify, or are looking for houses in different locations or property types that are not covered, need a hefty amount of cash in hand for a down payment and expenses such as legal fees, stamp duty and so on.

Purchasing a RM300,000 property with a 95% loan, means the buyer has to stump up a down payment of RM15,000. This is not a small amount and can be overwhelming. But saving does not have to be as hard as people think.

Here are some tips on how to save up for that down payment on the first home:

1. Calculate the budget and target

First things first, figure out how much is feasible to pay monthly for a home loan. List all monthly commitments and deduct the total from the net income. Or use websites like PropertyGuru’s Home Loan Eligibility & Affordability Calculator.

This will give an idea of the range of houses you can afford to buy. Deduct 10% from the maximum affordable price and that is the savings target.

2. Set aside a specific amount each month

Based on the earlier calculations of monthly commitments, fix an amount to set aside every month.

Create a new savings account, preferably one with a high interest rate, and transfer the amount to it every month on payday. Do not procrastinate, that way there is no temptation to spend it.

Some banks, such as Malayan Banking Bhd, Hong Leong, Cagamas Bhd and other financial institutions have goals savings plans, which automatically put aside a pre-set amount monthly.

Withdrawals are not permitted until the goal or the duration of the plan is reached.

3. Prioritise

Learn to differentiate wants from needs. That fancy coffee is not a need, nor is that paid movie account. It may be only RM15 per cup or RM35 a month but it adds up.

You could save hundreds a year just by giving up small luxuries. That’s not to say you cannot enjoy a treat every now and then, but there are always cheaper alternatives. Try dropping that gym membership and working out at home.

A good place to start when trying to save is to give up small luxuries like that expensive cup of coffee with croissant. (Rawpixel pic)

4. Reassess your living situation

Is the rent taking up too much of your monthly income? If so, it may be time to reassess your living situation.

If you are living alone, why not look for a housemate to share the rent with? Or look for cheaper accommodations.

It is not shameful for an adult to live with their parents, but make sure to pay some of the bills and help out with the chores.

5. Find extra income

There is a part-time job out there for everyone, regardless of skill set. There are many options, from food delivery to part-time home cleaning.

Turn strengths and talents into income by tutoring students, doing freelance writing, taking orders for cakes or cookies – whatever one does best.

There are also weekend jobs, such as sales promoter or in a fast-food restaurant. Those who prefer to work from home could sign up for a dropship, where one promotes and accepts orders for other people’s products. The income may not be much, but it’s better than nothing.

6. Check on progress every now and then

Check once in a while to make sure your savings plan is on track and offering you the best interest rate.

If the savings target is not being met, it may be time to reassess your expenses and identify where costs can be cut.

Make saving fun and celebrate targets met by giving yourself a massage or a pedicure. (Rawpixel pic)

7. Make it fun

Those saving up with a spouse or partner can make it more fun by turning it into a competition. See who can save the most each month, or who’s the first to reach a certain milestone.

Choose a prize or punishment that is not taxing on the wallet. Doing all the chores for two weeks would be a good punishment. A big hug could be the prize.

Those saving alone could reward themselves for hitting milestones, like having a massage after hitting the first RM5,000. Moderation is key. Don’t go overboard and treat yourself to a vacation.

These saving tips will help not just in saving for a house, as having an emergency fund is also important. It is advisable to have some money put aside for a rainy day, especially in uncertain economic times like these.

Last but not least, don’t forget to check the market price of the desired house location by searching Property Advisor, to ensure not too much of those careful savings are spent.

This article was written by Adlene Hanna of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.