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How to raise money for deposit on your first house

How to raise money for deposit on your first house

For many of us, owning a home would be a dream come true. It is mostly a dream because the costs of buying a house are huge, especially buying one in a “good neighbourhood”.  Despite those challenges, it is very possible to get the process going and achieving your dreams of owning your own home.

After you have identified the house or home you want to buy, you need to look at how to raise a deposit, which usually consists of a percentage of the total cost, lawyer fees, insurance, valuer and taxes. This is especially if you are taking a mortgage. If you are buying in installments, some of those fees can be paid towards the end, but you still need to come up with the deposit amount.

Do not be discouraged about the amounts required for the down-payment. There are many great stories of how others did it successfully.

Have the right mindset is very key, without it, you cannot easily make it. Do not fear, follow some or all of the following ideas, keep your eye on the prize.

 

1. Cut down your shopping expenses

Closely observe your expenses for a period of 3 months, writing down every small and large expense, including transaction costs, travel, supermarket shopping, green market shopping, even the street vendors expenses. Once you have your 3-month report, scrutinize your monthly expenses with a thick lense to weed out any unnecessary expenses. Proceed to create a lean, mean monthly budget and stick to it.

However, remember to have a small percentage of your income to splurge for entertainment, spend on yourself, or if married take your spouse out at least once a month, and if you have children, do something good for them too. If you don’t have some form of enjoyment, it can become a drag, and you or your spouse may end up even hating the process. I recommend not more than 5% of your income for such in your budget.

Think harder before you upgrade your phone, reduce (eliminate) those coffees and lunch expenses. Carry packed lunch as much as possible. Buy discounted or second-hand clothes and shoes. Avoid parking fees by taking public transport or carpooling where possible. Reduce/eliminate those uber rides.

One of the methods that works well for a friend is to get rid of the ATM card and use over the counter to withdraw once or twice a month from the bank. She also never uses mobile money or credit cards.

 

2. Move to a cheaper house

Do you really need to be staying in a 3 bedroomed, when you can comfortably fit in a 2 bedroomed? Must you live in that expensive neighborhood? Look at how you much can save by downsizing or downgrading where you stay.

 

3. Downgrade your car

For many, driving a good car may be a real boost to their self-esteem, and a good massage for their ego. It gives a sense of having “arrived”. But remember that that car you love so much, will one day be an old piece of junk. So why don’t you ditch it for a while, exchange it for a lower maintenance car and eventually you can go back to your nice rides when you have achieved your house owning goal.

 

4. Create a second income

Supplement your savings using a “side hustle”. Without overthinking, select a side hustle that will not put you in a “conflict of interest position” with your current employment (No need of risking losing your current job). There are many possibilities. Try to get into one that you can do with ease and without too much extra learning, or one that may require several years to reap benefits. A few side hustling opportunities I can think of right now are as follows:

  • Freelancing as a writer, translator, transcriber, web designer, graphics designer, bookkeeping service provider…. the list is endless
  • Conducting trainings
  • Teaching classes
  • Online shops (e-commerce) and also offline shops. Maybe stick to one type of product to make it easier to manage stock and sales
  • Multilevel Marketing – yes it works for many but requires patience, resilience, and strategy
  • Tech support, if you good in repairing any type of equipment, this is a very good one.
  • Business plans and coaching
  • Life coaching (requires training)

Marketing your services can be tricky, but you can start by going to networking events, talking to your family and friends, and eventually once business picks up, you can advertise your business on social media and Google.

 

Property for sale in Nairobi

 

5. Recruit your spouse to be part of the saving

As a married couple, if your spouse is on board, it will make it so much easier to raise that downpayment. At the very least he or she can participate in cost-cutting, and at best, they can contribute to the saving pot.

 

6. Consider a lower class house

If you are still not seeing the possibility of saving for that home you really want and have been dreaming about, consider starting from a lower class house, and then later you can flip it and level up from there.

 

7. Move back home

Also a possibility to consider, particularly, if you are lucky enough to have your parents/guardians within your city of residence. This is only a temporary arrangement because the saving on rent can go a long way in raising your house deposit.

 

8. Buy Off Plan

Often times, off plan purchases usually have an easier payment plan, which if you have a fairly good total household income, you may easily be able to make it.

It is best to avoid using a loan to buy a house off plan, since you may not be sure exactly when the house will be ready. Otherwise, you may find yourself paying off the loan for a long time, as you concurrently pay rent, and this may put a strain on your finances, particularly if you were planning to move into your home to and support the loan from what was your rent money.

 

Other ideas

  • Set aside any company bonuses.
  • Save your short term savings into the money market to reduce the temptation of dipping into it for any “emerging expenses”.
  • Ask the seller for an easier paying plan on your deposit.

Baseline

Note that you may be overestimating what you really need to start the journey of owning your own home. Work out exactly how much you really need to save.  Talk to several lenders to get the best deal for your mortgage, if you are going for one, as you get information on how much you will need to pay to lock in your home.

For many of us, downgrading our lifestyle could be a scary prospect, it may require a complete MINDSET change. REMEMBER TO KEEP YOUR EYES ON THE PRIZE.

 

“Anyone that does not wish or desire to stretch himself will get nowhere in this life. That is just the way life is.”
― Sunday Adelaja

 

What are your thoughts on the above ideas? Share any others you may have.

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