February 07, 2019
Some Ways to Save Up for a New Home
Anyone looking to buy a new home should know that they will need to put some money down in order to obtain it—usually something like 20% of the purchasing price, especially if one wants to avoid paying private mortgage insurance. This usually is no small amount, and while there are ways to avoid making a down payment, it is usually not a wise course of action.
In order to afford that up-front sum, there are a number of courses of action one can take to save that are not too hard on the potential homebuyer. Sometimes it just takes leveraging available money-management tools.
First of all, there’s the good old savings account. Finding an account with a good interest rate is key—that way, the money you’re putting into it (and leaving there) can add up and make more money than it would in an account that builds interest at a slower rate. Of course, the more money you’re able to stash into the savings account, the better, and the sooner one will have the amount available for down payment. This is an especially good tactic if you’re unsure when you’ll be buying a home and may need to withdraw the money on the turn of a dime.
A less flexible option is to purchase certificates of deposit (CDs). These net a higher interest rate than savings accounts—in exchange for locking the money in for a set term during which one cannot withdraw it (often 18 months, but terms do vary). When the time comes to withdraw the money, if one has not found a home to purchase, one can always use whatever the CD has made to purchase another CD, and build interest on the interest. CDs are a guaranteed investment, unlike investments made in the stock market—meaning you’re not going to lose money you invest in them and you will earn the interest promised. Still—if that money is locked into a CD when the perfect house shows up, you won’t have access to it. For some people that’s a deal breaker.
And then there’s the option of using new technologies for savings. There are a whole host of money-market applications appearing on mobile devices these days that people are using to startling effect. Simple, Acorns, and Digit, for example, help people save by investing certain amounts automatically based on their different criteria. (Acorns, for example, will invest the spare change on everyday purchases, rounded up to the nearest dollar. This can result in more savings than one might suspect.)
For those who choose to leverage these money market tools to their advantage in saving for a down payment, we here at Topouzis & Associates, P.C. are proud to provide the peace of mind that, after purchase, a new home’s title will not be subject to any nasty surprises. Whether you’re looking to engage in the market in Providence, Rhode Island; Boca Raton, Florida; or Peabody, Massachusetts, feel free to contact us for more information.