Buying the first house can be a major challenge. Given the current market trends, it has become even more difficult to save-up enough on your salary to pay for the down-payment. But we have got the perfect approach to invest in your savings in order to buy your first house.
It is key to remember that the down-payment options are different for the kind of property and the type of financing you’re applying for. Applying for a commercial property will have different down payment options than that of a domestic property[i]. Firstly, and far-most it is important to know the type of property you’re considering to purchase. Once you have calculated the estimated down payment you are most likely to make it is time to start investing your down payment savings to get the ball rolling towards getting that first property you always dreamt of.
The major point is to understand that there are two types of investments: Low risk-low return and high risk-high return. Basically, it all depends on how “safe” do you want to play, if you are on a budget and your circumstances don’t allow for much room to save-up, it is always better to play on the safer and long term option, on the other hand if you have a reasonable financial arrangement and are just using your saving for down payment than it is better to go for something a bit more rewarding but risky.
Certificates of Deposits
Getting CD’s (Certificate of deposits) is one of the best low-risk investment options out there. However, it is worth considering that there are certain things you should consider before starting to invest in CD’s. Some CD’s incur high penalties on premature amount withdrawal, so it is worth considering whether you might want to take out cash before maturation or not. Other factors to consider are the APR (Annual Percentage Rate) the bank is offering on the CD, APY (Annual Percentage Yield) the amount you will learn in the multi-year life of your CD through compounding[ii]. Investing in CD’s is a good way if you are planning to make your down payment a couple of years down the road.
Treasury Bills
Treasury bills are one of the safest options for safe-handed investors. Treasury Bills are practically guaranteed by the Government. They offer a smaller but safe profit on the investment. However, if you are thinking about making some serious returns from your investment then Treasury Bills are not going to cut it. The working of treasury bills is simple, say you buy a bill of 10,000$, the Government will sell it to you for 9,700$, the bills will have a preset date of maturation[iii]. Once the bill matures it will be cashed for the original amount (9,700$) plus 300$ extra, making it a full 10,000$. While not the best option for a single main investment, however this is an option worth considering to diversify your financial portfolio.
Stock Exchange
One of the more volatile options, Stock Exchange is an investment option which can yield a greater result with a quicker pace[iv]. Investing in the stock exchange enables the investors to design a program for themselves, where they can decide for themselves the amount of risks, they are willing to take and the sort of returns they are seeking to obtain from their investments. Investors have the option to either invest with a brokerage firm or make the individual investments themselves to by managing their on-investment accounts. Nowadays, the option to get a robo-account where the investor can set predetermined principles on the investing option, along with the amount of the risk to be taken on an investment, while the account itself is managed automatically. Many firms are utilizing the advancements in artificial intelligence to assist in the decision making for investments.
It is advisable to seek a professional investment consultant before making any choices on your hard-earned investments. Furthermore, keeping a diverse investment portfolio is always the best solution to minimize risk and maximize on the incomes. Investment is subject to risks and turbulence, but it is the easiest and most reliable way to gain financial stability.
[i] “Investment Property Down Payments: How much will you need, Webpage”/fool.com/Matt Franklen/Accessed on 31 March 2020/https://www.fool.com/millionacres/real-estate-financing/articles/investment-property-down-payments-how-much-will-you-need/
[ii] “How to invest in a certificate of deposit, Webpage”/guides.wsj.com/Corporate/Accessed on 31 March 2020/https://guides.wsj.com/personal-finance/investing/how-to-invest-in-a-certificate-of-deposit-cd/
[iii] “What are T-bills and should you invest in them?,Webpage”/smartasset.com/Rebecca Lake/24 March 2020/Accessed on 31 March 2020/https://smartasset.com/investing/what-are-t-bills-and-should-you-invest-in-them
[iv] “How to invest in stocks, Webpage”/nerdwallet.com/Arrielle’ O’Shea/9 February 2020/Accessed on 31 March 2020/https://www.nerdwallet.com/article/investing/how-to-invest-in-stocks