To own a home is a dream for most working class Filipinos. Suffice to say, it is the largest investment most of us make within our lifetimes. The significance of such a financial decision makes buying a home seem a little daunting, but like in most situations, the key is to be able to take the first step. In this case, it is raising enough money for the home’s down payment.
What Is a Down Payment?
A down payment is the portion of a property’s value which we pay directly with our own money upon its acquisition. The rest is covered by a home loan or mortgage.
While there are loans that do not necessitate the making of a down payment, financial experts still recommend opting to make a down payment so that the loan taken is smaller. This in turn results in a shorter loan term, as well as monthly payments and accrued interest that are considerably smaller than if no down payment is made.
Additionally, housing loans that involve a down payment during the purchase have more success at approval, as it is indicative of the buyer’s good financial standing and capability to pay for the loan in the future.
Slowly Increase That Down Payment
Unfortunately, establishing funding for a down payment can be a challenge in itself, and with current property prices, it may seem that a home loan without a down payment becomes the choice. However, through some strategy and a little effort, you can be well on your way to getting that home you want with a down payment in place. Lamudi Philippines lists down the ways you can inch your way closer to your down payment, and eventually dream home.
1. Simple: Save Your Money
There’s a saying that before you pay anyone you must first pay yourself. So each salary day, make sure you set aside at least 10 percent of your paycheck into your savings account.
To make this more convenient, try to set up a personal savings account with the same financial institution that handles your salary. It would allow you to arrange for a minimum amount from your salary to be automatically transferred to that particular personal account each pay day. This way, savings are already set aside even before you have a chance at spending your salary.
Extra Tip: Set up the personal savings account to not include an ATM card. In this way, you’re not tempted to withdraw what you save. Also, if you end up having any extra income left over from your last salary, save it too. Don’t just settle for the minimum savings you try to meet each pay day during the opportunities that you can save more.
2. Get Back to Basics
The idea is to save for your future home in all possible ways, including in your daily expenses. This means opting for instant coffee over your regular order of Starbucks, taking the jeep or MRT/LRT more instead of always taking a taxi or driving a private vehicle, and having more home-cooked meals over eating out.
Similar to saving 10% of each paycheck, settling back to basics may not seem to yield too much savings, and at times may be downright uncomfortable. However, over time, the amount saved can be quite significant.
Extra Tip: Take getting back to basics a little further, and get rid of things you hardly use. If there is a PlayStation or entertainment system that you seldom get to use because you’re busy working to earn for your future home, you might as well sell them while their value is high. Not only do you earn from their sale, you also save with less utility expenses to cover.
3. Pay Your Credit Card Bill on Time
There’s a saying that if you are unable to purchase an item in cash, you outright can’t afford it. It is paramount that you sort out your finances before making as large an investment as a home, and whether or not you should continue using a credit card is a key decision to make.
While the safety of having not to carry cash around and the convenience of being to make a purchase in almost any place that honors a credit card is great to have, is that enough to make up for the interest accrued for using it? If it is, then just make sure it is I paid on time to avoid any additional, and unnecessary, interest and fees. You can also resort to having the card’s limit reduced so that it can truly be relegated to emergency expenses.
Bonus Tip: Just don’t use a credit card at all. Sure, it may be a chore to have to withdraw or carry money around as you make your purchases, but by eliminating the convenience that a card provides, you don’t just avoid extra costs associated with the card, you also avoid making unnecessary purchases.
4. Put in Extra Work
To gain some serious ground on saving for your down payment, you must readily consider boosting your income with additional. Apart from rendering overtime with your current employ, and short of getting another full-time job, the best way to do so is through part-time or freelance work.
The latter is what is recommended, since freelance work allows you to work on your own time and pace. With the communication and technology advancements continuously being made, many opportunities can be found online for essentially any type of skill set. Popular online platforms to look for additional, and even full-time, work include Elance, Upwork, and Raket.ph, among others.
Extra Tip: When you decide to do freelance work, make sure you remain consistent and productive, even if just within at least online platform. By continuing to do consistently good work, you’ll establish a stellar reputation online and would reap the benefit of employers seeking your services as opposed to the other way around, taking your closer to your goal of earning more for your home down payment.
Saving can only take you so far, and of course the best way to get more out of what you’ve saved and ultimately have it work well as your down payments is to have it grow via investments.
What you invest need not be too large, as you can start with something as modest as Php5,000, and putting it in a mutual fund or time deposit to earn interest. If you have savings to spare that you only foresee as being used for your future home purchase, you can diversify by investing small increments in different investments. Time correctly, and these could pay off well in funding your home down payment.
Extra Tip: Work with an expert. Contrary to what many others perceive, working with a financial expert is a great way to make savings grow. The key is to be diligent in finding an expert or institution with a proven track record, whose success stories go beyond what’s shown in ads and social media posts.
About the contributor:
Lamudi is the Philippines’ leading property portal, with over 80,000 listings of for-sale and for-rent properties from across the country. Launched in 2013, this fast-growing platform is currently available in 32 countries in Asia, the Middle East, Africa and Latin America. For more information, please visit http://www.lamudi.com.ph