Have you ever wondered how even the person with an average salary can manage to come up with a down payment for a house and lot or condo? If you still think that this is an incredulous idea, it’s actually not. Pursuit of Passion demystifies home down payment and how almost anyone can take it on, even with financial obligations.
How much really is the down payment?
In the Philippines, the standard amount that you actually need to cough up for a down payment is 20 percent of your future home’s price. Sure, some ads will say that there is no “deposit” at all, and will only require you to put in a reservation fee of P5,000. But it is standard that you pay for the down payment and finance the rest of it via a home loan or in-house financing. Some developers offer flexibility that would allow qualified home buyers to spread the down payment in easy-on-the-pocket installments within a certain period of time.
Can I really come up with the money?
You might not have enough amount saved to cover for a down payment on your home, but it doesn’t mean that it’s impossible to raise funds for it. Here are tips to help you get the money you need:
Down Payment Schedule
|Timeframe||1 Year||3 Years|
|Downpayment Goal||(Price/12)/12 months||(Price/12)/36 months|
|Set aside DP goal/mo from primary income||Set aside DP goal/mo from primary income|
|Get second job or sideline for extra source of income||Get second job or sideline for extra source of income|
|Sell items||Sell items|
|Buy financial product (listed in item #4)|
|Cut to basics||Cut to basics|
|Family co-investment||Family co-investment|
1. After choosing the home you want, consider the price and set a budget.
Knowing your goal is the first step in achieving success. Once you consider the price, set the budget by determining the higher market price of a similar property. This way, any price difference to the actual prospective property will help you put up a competitive offer if needed, or cover additional expenses that you might incur toward signing the sales contract.
2. Determine how quickly you want to save.
Knowing your time frame will allow you to work on toward meeting your down payment goal. This is especially essential for people who are aiming to own a home in a limited time.
For example, you determined you need to save P400,000 on a condo. Your daily or monthly savings goal will be different if you set your time frame to pay for the allotted amount in 1 or 2 years.
3. Earning money in foreign currency? Save a portion first in original currency before converting them into pesos.
Saving money in US dollars will allow your money to earn interest as compared to saving money in pesos. And if you live in the Philippines, it puts you under the illusion that you are literally putting your money away because you can’t spend the money.
Moreover, majority of banks offer financial products like dollar accounts that offer high interest rates as compared to a peso savings account. Opening a USD500 dollar account will earn you 0.25 percent to 0.35 percent interest rate annually, as compared to opening a Php5,000 peso account at 0.25 percent to 0.375 percent annual interest rate.
4. … Or you can invest money on a well-managed financial product.
Investing in a mutual fund, time deposit, or any high interest-earning financial product cannot only help you take advantage of its earning potential in a volatile market, you can also take advantage of the expertise of the very people who will be managing the investment. These experts will now do the work of increasing the value of your chosen financial product.
For example, finance expert Randall Tiongson said bonds issued by top corporations like Ayala Corp are expected to incur higher yields as the risks associated with corporate bonds are higher than those issued by the government.
If you already have the money but are not mentally prepared to take the plunge yet, you can grow the money by investing it in a HomeStarter Bond. The minimum investment in a HomeStarter Bond is Php50,000, and you can increase your investment in Php10,000 increments up tp Php10,000,000.
If you are holder of a Homestarter Bond, you are entitled to Bonus Credit, of which that can be applied towards a new residential property purchase. The Bonus Credit will be applied on the first down payment upon reservation. It will take effect within 6 months to 3 years after the issue date (April 2017 to October 2019).
5. Cut down to the bare essentials, and let everyone know your plan.
Do you still need that tall cup of coffee from Starbucks? Do you eat out or go out a lot? Do you go on a small shopping trip every payday? Do you have more than one TV subscription? These things may be small change to you, but they amount to a sizeable chunk if you compute these “small” expenses you’ve spent for a month.
And if you plan to make bolder changes to meet your down payment schedule, determine the things you can live without or downgrade to. If you’re a social butterfly, just have friends over for potluck so you won’t spend a fortune eating out. Do a clothes swap with a best friend for a fresh new outfit.
6. Get a second job that you can MANAGE.
The money you earn from your second job can go toward your down payment fund, apart from the portion you have already set aside from your main source of income.
If you are on a lookout for a second job, get a part-time, project-based, or contract work that will not be in conflict with your main job. There are many internet-based freelance jobs that can allow you more flexibility in terms of time. Moreover, your second job should entail responsibilities that would come naturally to you and will not require a lot of training. If you can’t find one that’s flexible and natural to you, you can try selling basic goods or products on the side.
7. Ask your family to “co-invest” with you.
If buying a home is ultimately your family’s dream, then it would best to give them the opportunity to pitch in, especially if you have the support of your family and friends.
Your parents or spouse can help you with a loan or alleviate you from a particular financial responsibility (ex. paying your sister’s tuition). Whatever they contribute, it really helps to have the support of the very people whom you’ve worked hard to give a home to call their own.