CHANIA REAL ESTATE HELP & RESOURCES
How to Save a Down Payment for a House in Chania, Crete?
How Do I Save for a Home Down Payment?
When embarking on the journey of homeownership, a significant down payment is often heralded as a wise investment strategy, yielding substantial savings over time. However, accumulating the necessary funds demands steadfast discipline, a feat not easily achieved.
Here, we unveil savvy tactics to amass a down payment intelligently, setting the stage for a successful home purchase.
Even if your plans to acquire a property in Crete are a few years down the road, it’s natural to begin contemplating the process of saving for a down payment to turn your dream into reality.
Diverging from saving for retirement, where funds are typically earmarked for distant future use, a down payment represents an initial, upfront investment essential for acquiring significant assets like a house or a car.
Within this guide, we delve into the intricacies of initiating savings for what may be the most substantial purchase of your lifetime – a property in the breathtaking landscapes of Crete, Greece – while elucidating the most astute methods to achieve this goal.
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.
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 in your preferred savings plan.
Savings will be largely determined by your income and expenses and other demands. Moreover, there are always needs that can 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 to luxury hotels at weekends. That is not the purpose of 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, and positive, evaluate your needs often and don’t be afraid to adjust your savings accordingly. Budgeting is all about balance and reliability.
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 per cent down, and at closing, you can expect to spend about 2 to 6 per cent 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 per cent 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. You can also discover some exceptional information about the process of buying a property in our Property Buying Guide or on how to find a property in Chania, Crete.
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As the information is for general use and not intended to serve as advice, no warranty is given in relation to the accuracy, reliability, or appropriateness of any information. The information does not constitute professional advice and should not be relied upon as such. Users are therefore encouraged to consult with their chosen professional advisers before making any decision.
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