Saving for a Down Payment as a Renter

by Elayne Jassey 02/25/2019

It can be difficult to find the extra savings to put towards your first home as a renter. With rent and utility prices rising, most people’s paychecks are leaving them with less and less savings at the end of the month.

Buying your first home, however, can be a great long-term financial decision. It will help you build equity, and, eventually, you’ll be able to use that equity toward another home or toward retiring.

In today’s post, we’ll talk about some of the ways to save for a down payment while renting an apartment.

How much to save

In order to make the most of your first home purchase, you’ll want to save up as much of a down payment as possible. This will help you receive the lowest interest rate and reduce the amount you’ll pay toward interest.

If you can manage to save 20% of the loan, you’ll also be able to waive private mortgage insurance (PMI), that would otherwise set you back around $100 per month or more.

Smart ways to save while renting

If you’re ready to get serious about saving for your first down payment, let’s talk about the best way to approach your savings plan.

Pay off small debts

If you’ve had that lingering credit card debt that you’ve never quite paid off, now is the time. Take a look at your current debts. Pay off the smaller balances first and focus on debt with the highest interest rate.

This will enable you to start making larger deposits toward your down payment savings sooner and can help you avoid needlessly paying interest on small loans and credit card debt.

Open a dedicated account or CD

The best way to make sure you contribute to your down payment savings plan is to open a savings account or take out a CD (certificate of deposit).

A savings account with a high-interest return is a good option for people who are worried that they may need to access their funds before they’re ready to buy a home.

If you’re comfortable with not being able to access your funds until a set date, then a CD could help you save more money.

Since CDs are a one-time payment, many people choose to combine both CDs and high-interest savings accounts to achieve their savings goals.

Regardless of which option you choose, be sure to shop around for the highest interest rate. Online banks tend to have higher rates than traditional banks and are also easy to sign up for.

Direct deposit a portion of your pay

Opening a bank account or CD won’t do you any good if you don’t commit to contributing to it. If you are paid via direct deposit, visit your HR office and ask them to reassign a portion of your weekly pay to your new account.

By following these tips, you’ll be able to better prepare for your down payment. Don’t  wait! The sooner you start saving, the sooner you’ll be able to purchase your first home.

About the Author
Author

Elayne Jassey

 

Your Neighborhood Expert!

Hi, I'm Elayne Jassey and in addition to my passion for real estate, I have a passion for my family, people, competitive games and Stamford! I have loved living in Stamford, Connecticut for the last 35 years. During that time I raised two daughters here and became quite involved in our local civic life. I was very active in Board of Education affairs during all the years my daughters spent in the Stamford public schools, and my early experience as a middle school teacher gave me a great appreciation for the strengths of the Stamford schools. I am currently a member of our Downtown Committee and I'm delighted to have participated in processes that have resulted in everything from encouraging the University of Connecticut to move into their new-in-town branch location, to bringing the excitement of the area's largest Thanksgiving Day Parade, complete with soaring balloons and marching bands, to town. 

I suspect the greatest joy in my professional life is that I meet and work with so many different and interesting people. I enjoy my customers and I am pleased that I build close relationships with them that I maintain for years. These relationships have resulted in a high degree of customer loyalty, and most importantly many close and rewarding friendships. In fact, I continue to work with people I listed, rented or sold properties to when I first entered the profession, and now I have begun selling to the next generation in their families! 

When not spending time with my family or savoring time with my granddaughter as she explores the world, I love to play games. Whether participating in a hard-fought game of Scrabble, playing cards or coming up with the answers in word games and puzzles, I am energized by good competition and problem-solving. In fact, I find creating a successful real estate transaction is a composite of all the things I most enjoy. It combines the problem-solving excitement of detective work with the joy of matchmaking. Each new customer presents a unique set of needs and goals, a special personality and a sense of individual style, all within clearly defined financial strictures. Understanding all these factors and fitting the pieces together successfully is the challenge that makes the selling of real estate so special to me. And it allows me to use my considerable energy, enthusiasm, and entrepreneurial spirit to work hard at meeting my own personal goals. 

People often say that I am a very lucky person. I agree. I live in a community I love. I am surrounded by family and friends, and work in a profession that still engages me deeply. And I've noticed that the harder I work, the luckier I am!