In 2019, more people are turning towards renting because they simply cannot afford the huge deposit on their own place. There are so many things to pay for when buying a home including the cost of the property, the furniture and the insurance – so how do you pay for it all? Many people save up for their first home and this can be a lengthy process.
According to the University of Minnesota, there is a major group of people in America who are more likely to rent than own and this is those in their 20s. Is this because of a distaste towards buying? Or can they simply not afford to pay for the deposit? More than 100 million Americans rent, although 2:1 Americans own their own home.
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Here, we are going to give you some advice to help you achieve this and give you a basic understanding of the financial obligations that are involved. Keep reading to find out more.
When you are investing in a property, you need to put down a deposit. Unless you are planning on paying the whole cost of the place outright, this will usually need to be around 20%. Of course, there are other options when it comes to this as you can sometimes put down 15% or 10% depending on your current finances and how long you are planning on taking out the mortgage for.
According to Lemonade, there are many advantages to opting for a 20% deposit. These include lower interest rates, lower monthly payments and a better chance of being the person that succeeds with their offer. These are all things that are extremely desirable for those who are hoping to buy a property without breaking the bank.
While you don’t need to have a 20% deposit on your property, it doesn’t hurt to spend some more time saving up to take advantage of these. With lower monthly payments, you’ll have more money to spend on things like insurance and decorating.
Setting Up A Savings Plan
Saving in 2019 is harder than ever with new products being introduced all of the time that make us want to throw our money at them. This is why more people are setting up savings plans with a goal figure in mind and a period of time that they would like to achieve this goal in.
It is probably going to take you a long time to save up this cash, depending on how much you earn and how much you are willing to put aside. According to Veritas Urbis Economics, a combined household income of $61,000 can save up $17,500 within 3 years. Of course, this is only 7% of a home with a price of $252,100 so there is still a long way to go.
Is It Possible To Save In A Few Years?
Many people are giving up on saving for their own home due to how long it can take to get even close to the 20% deposit figure. Of course, if you are disciplined and know how to invest your money well then you could potentially have saved up enough cash within a few years.
This can be done by allocating a flat percentage of either 15% or 20% to the salary that you get and having this come out of your account and into a savings account before you can spend it. This is a huge ask but if you are thinking about saving up for your own home then you should consider it.
In America, those in their 20s are clearly struggling to pay the high cost of buying their own property. This means that they cannot get on the property ladder and end up throwing money away for longer.
If you are thinking about buying your own home, then you need to make sure that you have the funds to cover all of the expenses. The deposit is the first hurdle but after that, you will need to think about furnishing the house and protecting it through insurance and security. It is possible to get on that property ladder by saving money where you can and possibly lowering your expectations when it comes to your first property value.
While 20% deposits are not always required, this size of a deposit can come with many benefits. Save, invest and guarantee financial success for yourself in the future.