It will take discipline and diligence to stay on the path toward that dream home, but it’s possible. The first steps forward are to identify your target price ranges and when you want to achieve your goal.
Starting Point
If you already own a home, you may want to learn its approximate value if you plan to use its equity to move up. Bear in mind that real estate markets change in response to supply and demand and home values aren’t always stable.
Use your estimated equity as a springboard for calculating the amount you need. Financial resources include your savings, retirement accounts, or other assets you can liquidate.
Savings
Setting aside a percentage of your monthly income to save the down payment for an upscale home is a sensible move. Take a look at your budget and see where you can trim your expenses or forgo some luxuries until you’ve met your financial goals. Regardless of your home purchase plans, it’s a good idea to have some liquidity you can access quickly should you need it for an unforeseen expense or event.
You don’t need to keep all your savings in one account. Look for places that give you the highest return over the time period you’ll need to save for a luxury home. Some CDs have a short maturity period and generally provide higher returns than bank savings accounts.
Borrowing from Retirement Accounts
Retirement plans can be a source for the down payment for another home. There are guidelines to follow and penalties if you don’t repay the loan on schedule. But using the retirement funds, especially if your employer makes a contribution, could be an excellent choice to increase your down payment.
Borrowed money from 401ks won’t show up on your credit report or increase your debt-to-income ratio. It’s especially advantageous if you increase your savings to the maximum allowable if your employer contributes matching funds.
Bottom Line
Exercising the discipline and diligence it takes to get into a home you’ve always dreamed from does take an effort. It will pay off once you achieve that home both emotionally and financially. You’ll also be able to use the habits that put you into the home to your advantage for other important purchases.
