Even if you don’t plan to buy a house in Crete for several years, you’ve probably started thinking about how to save for a down payment to make your dream come true.

Different than saving for retirement, where the funds you save likely won’t be accessed for many more years, a down payment (or deposit) is an initial up-front partial payment for the purchase of expensive items such as a house or a car.

In this guide, we’ll cover how to start saving for the biggest purchase you’ll likely every make in order to buy a property in the spectacular island of Crete, Greece, and how to do it in the smartest way possible.

1. How much you will need to save

Before you start saving a down payment for a house, you should discover how much money you’ll need to save.  As a rule of thumb, your housing expense should not exceed 25 percent of your stable monthly net income. So if your income is € 2,500, you can safely allocate € 625.00 of that (€ 2,500 x 0.25) to your future house payment.

The € 625.00 will include mortgage loan principal and interest rate, real estate taxes, private mortgage insurance (PMI) and some other taxes, if any.

With mortgage rates at about 4.0 percent, this will translate into a mortgage loan amount of about € 150.000.

To arrive at the amount of money that you can afford to pay for a house, you’ll have to add the down payment on top of that. In today’s tight lending market, you should generally expect to make a 20– 25 percent down payment on a house.

You can certainly put down less, but you will likely be paying a higher rate and, if you have any kind of credit issues. However, getting a mortgage with bad credit is possible, but you may need a larger deposit or a guarantor, as banks may see you as more of a risk.

So taking our example of a mortgage for € 150.000, and making a provision for a 20 percent down payment, we can calculate the actual euro amount this way:

€ 150.000 divided by .80 = € 187.500, minus the € 150.000 mortgage loan = € 37,500, or rounded up, € 38,000

Rounding the numbers up, you’ll be purchasing a house for € 188.000, with a € 150.000 mortgage, and a down payment of about € 38,000. Please note that this paradigm is just for illustration purposes only.

Photo by Jan Antonin Kolar on Unsplash

2. Determine your time-frame

The next step is to determine your time-frame. If you plan on purchasing a home in Crete, Greece in five years, you’ll have to be prepared to save € 7,600 per year (€ 38,000 divided by five years).

Naturally, the shorter your time-frame is, the higher your annual savings goal will be.

3. Build flexibility into your savings plan

The next step is to build some kind of flexibility into your savings plan. Whatever the size of your down payment, it is critically important to establish some kind of flexibility into your preferable savings plan. Savings will be largely determined by your income and expenses and other demands. Moreover, there are always needs that can be arise because of our dynamic way of living and interacting with our society.

One can say, no more shopping, no more eating out at restaurants, no more escaping on luxury hotels at weekends. That is not the purpose of a improving your budget. You need to determine which needs address necessities and which ones cover luxuries. Then, you can prioritize your budgeting goals accordingly.

4. Commitment

Committing to your budget will get you there. Remain realistic, positive,  evaluate your needs often and don’t be afraid to adjust your savings accordingly. Budgeting is all about balance and reliability.

Photo by Michael Dam on Unsplash

5. Can you really afford to buy a house in Chania, Crete?

There is a plethora of things to consider when deciding if you can really afford a house. For example, you’ll need a significant amount of money to invest for your down payment and closing costs. Most property buyers in the Prefecture of Chania put anywhere from 5 to 15 percent down, and at closing, you can expect to spend about 2 to 6 percent of the property sale price.

Moreover, consider monthly utility payments and ongoing property management costs. In addition to the standard costs, you’ll have homeowner’s insurance, property taxes and loan insurance. Repairs and maintenance costs will vary widely, but you can expect to spend around 0.5 -1.0 percent of the home sale price every year—and more if it’s a fixer-price from a property management company.

We break down these costs more for you in our Chania Property Buyers Expenses guide, here.

Even with all that info, it can be difficult to do a side-by-side comparison of home ownership costs with your current property costs in your home country.

6. Find a professional real estate team in Chania, Crete

Though your search for homes in Chania or Rethymnon may start online, it shouldn’t end there. You can do a lot of research on your own, but you need the help of a real estate professional when it comes to actually finding and securing your perfect home in Chania, Crete.

ARENCORES can help you figure out how much house you can afford and what kind of homes you can expect to find, considering the price range, property availability and market trends. You can also search for off-market properties and discover great real estate deals in Chania and Rethymnon before anyone else.