While your apartment may offer many amenities and luxuries that you absolutely love, it may not be the end-all of living spaces for you. But because you pay a rent note every month, you are not sure how you could possibly ever save enough money to buy a house. But all it really takes is some strong determination and reorganization of your financial affairs to get your plan off the ground. It may be difficult to save for a mortgage while renting, but it is not impossible.
Commit to a Savings Account
Opening up a savings account is stop number one when you are trying to save for the purchase of a home. A savings account will help you build interest on your money. Although a savings account may not offer a huge amount of interest, it will add up as the years go by.
Try to dedicate 10% of every paycheck to your savings account. It may not seem like much, but a weekly contribution of $50 ends up to be a total of $600 at the end of a year. Sure, $600 probably isn’t enough money for a down payment on a house. But the goal is to do it every week. At the end of 5 years, you will have saved $3000 towards the purchase of your home, not including the interest. That can certainly be a big help when trying to save for a mortgage.
The next thing to do is eliminate your credit card debt. Eliminating credit card debt is a huge money saver. Monthly credit card payments can drag you down. Instead of saving your money, you are paying money back, plus interest. So, the most important thing is to get rid of it all.
Consolidating your credit card debit can help you to get a lower interest rate and save you money over the term of the loan. A lower interest rate means less money that you are paying out every month. Because you are trying to save money for a mortgage, a reduction of even a percentage or two can be a great help.
Just like your savings account, if you can dedicate 10% of every paycheck to an extra credit card payment, you can cut down on the interest you pay and the length of time it takes you to pay it off.
Invest in Your Future
If you do not already have a Roth IRA, then go get one immediately. Roth IRAs are one of the best investment options available to you. A Roth IRA will allow you to invest in different markets, high-risk accounts and low-risk accounts, giving you the benefit of maximizing your return. Most IRAs only require a minimum of a $50 contribution per month.
The most important reason why you should open up a Roth IRA is because you are allowed to withdraw your contributions and earnings, prior to retirement age, for the purpose of buying a home. When you are using the money to buy a home, the government allows that you can withdraw earnings and contributions without a tax charge and without penalty. Not only does a Roth IRA give you the benefit of earning on your contributions, but also the advantage of your money being held tax-free.
It is possible to save for a mortgage while renting. All you have to do is get your financial situation under control. If you can maximize the return on your money and decrease or eliminate your credit card debt, you will find yourself in a very comfortable position to buy your first home.