Plan to Buy a House? Here are a Few tips to Save for Down Payment 

The first significant step toward purchasing a home is to save for a down payment.

Putting money away clearly necessitates discipline, and some serious thoughts should be put into the investment options to generate maximum returns.

Whether you, as a home buyer, save those tens of thousands in a bank, a government bond or the equity market should depend on your timeframe for becoming a homeowner. 

How to Save for a House - Tips for Saving the Down Payment

A down payment essentially means an upfront payment to be made when you sign up to buy a house.

Here are the top three tips to help you understand how to save money to buy a house, along with the process of funding the purchase of your dream home.

- Stick to the 50-30-20 Rule

One of the methods to accomplish substantial savings is to stick to a 50-30-20 budget, where 50% of your take-home pay is set aside for fixed costs, 30% for other discretionary expenses, and 20% is set aside for savings.

Cutting out on amenities you may otherwise afford will not be easy, but it will be well worth the effort when you move into your new house.

- Consider Making Significant Lifestyle Adjustments

If you are truly focused and devoted to purchasing your own home, you must consider making significant lifestyle changes. One option is to temporarily relocate to a smaller apartment, which could help save you a major portion of your monthly rent. 

You could also consider other sources of money in addition to your normal employment. 

Doing both and living within your means for at least two to three years, cutting down on expenses such as vacations, entertainment, and memberships, can help you save for that down payment on your home.

- Monetizing Your Other Assets

If you want to buy your own home, you should start saving at least three to four years ahead of time. It is one of the best way to save for a house.

If you haven’t already done so, you might want to explore monetizing some of your other assets to help pay for the down payment. For instance, a fixed deposit might be liquidated, or you can borrow against an FD if you are in better financial standing.

You can also borrow against a life insurance policy where up to 85-90 per cent of the surrender value might be available as a loan amount, depending on your insurance company’s terms.

The interest rate for the same could be in the region of 9-10%, and you have the option of repaying the loan in full or in half-yearly instalments.

Alternatively, you could also request a partial withdrawal from your employee benefit plan (EPF). These are the most effective ways to raise funds for a down payment on a home. 

Credit cards and personal loans are better avoided considering the high interest rates. Opting for these would, in turn, increase your long-term debt burden.

You may also want to use Groww's Home Loan EMI Calculator to assess your EMI.