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Owning that dream home isn’t just a tick off of the bucket list – it’s a goal millions of people across the world are trying to accomplish. And the urge to be a homeowner gets stronger when you’ve been renting a place for a while.

However, home ownership is getting even more difficult with the increasing prices of real estate in Malaysia compounded further by the rising cost of living. In fact, this worldwide concern has led the Malaysian government to introduce affordable housing schemes for its citizens like MyHome and MyDeposit. Do check out our blog 7 Government Housing Schemes First-Time Buyers Must Check Out for some useful insights.

Even with these schemes in place, there’s still one hurdle faced by many first-time owners — arranging for the down payment fund if you’re going to take a home loan. Now, if your financial record shows stability and you have a good credit score, chances are you may get a sanction of as much as 90-95% of your property cost as a loan.

But even in the best case scenario, you’ll still have to arrange for the remaining 5-10% amount which constitutes the down payment fund. And there are other costs involved too. Something which may appear insurmountable if you don’t have proper plans in place.

Luckily for you, we've listed down some tips and tricks to help you get started on your journey to accumulate your home down payment fund.

1. Get clarity on your down payment fund

Before you begin with anything, it’s crucial to know how much you need to save up for the down payment fund. This means understanding the type of home you want and the down payment tag attached to it. And there’s only one way out — research, and loads of it!

And even if you haven’t zeroed in on the exact house you want to buy in the future, your research will help you get a fair idea of how much should a house cost in your preferred locality that meets your budget.

Then comes your credit score. If you have a good score you may qualify for a 80-90% loan. If you don’t, you should try working towards improving it at the earliest. Here are 7 Useful Tips to Improve Your Credit Score which you can check out! Alternatively, you’ll have to save up more for the down payment fund if your credit score is less.

Another important thing to consider is that there will be a number of other costs to take care of apart from the down payment fund, like mortgage fees, legal fees, land tax, interior decoration charges (if not covered in the loan), etc. Factor in inflation as well.

Once you take into account all these costs you’ll come up with a target figure. Then divide it by the number of months you want to give yourself to raise that amount. That would be your monthly savings target to build your home down payment fund. Having clarity on your goal will always help!

Alternatively, put in the research to find out approximately how much will your monthly home loan instalment cost for a property of your liking and try and save up that much every month.

Related: 10 Important Things Real Estate Newbies Should Be Aware Of

2. Cut down on wasteful spends to boost savings

Once you have a clear monthly figure to save, it’s time to implement your plan. Firstly, you should closely track every sen that leaves your account to look for ways to cut down on wasteful expenses. Overpriced gym membership, costly cable TV subscription when you’re mostly glued to internet content, frequent dine-outs, impulsive shopping are the obvious consideration points. You may be in for an unpleasant surprise when you realise how much money you actually waste on unnecessary — at times unhealthy — things each month that can be put to better use!

You’ll be well-advised to read our blog Caution! 20 Everyday Habits that are Making You Broke for some helpful insights. Also, such healthy cost-cutting habits will inculcate financial discipline which will help you better manage your finances in the future when you’ll have to repay your home loan instalments every month.

However, even if you have to go on a financial diet, keep in mind never to skimp on essential spends like medical checkups and vehicle servicing as doing so can actually cost you a bomb in the future! Here are 7 Things You Should Never Skimp on to Save Money you must check out.

Must read: 7 Useful Tips If You’re Planning to Take a Home Loan in Malaysia

3. Take steps to safeguard your down payment fund

So you’re diligently setting aside money every month for your down payment fund but suddenly one day you fall sick and need to get hospitalised. To make things worse, you had to use your down payment fund to pay for the medical bills.

It’s a fact that we don’t have control over future uncertainties, but we can take steps to safeguard our finances in tackling them in order to ensure we don’t jeopardise our financial goals. Here are a few tips that you can follow:

Emergency fund: Build a separate emergency fund if you haven’t done so yet so that you need not depend on your down payment savings to bail you out of a sudden situation like medical emergency or job loss. Ideally, an emergency fund should have at least 3-6 months of your monthly expenses and should be easily accessible — like in a savings account. Read our blog to know how you can go about building one

Health insurance: Consider signing up for a health insurance plan (preferably with accident cover) for the same reason. Here are 5 top medical insurance plans you can check out

Stay fit: Lead a healthy life and quit unhealthy habits (like smoking) so that you minimise your chances of falling sick which would also translate to a financial burden. Here are 8 Smart Things You Can Do Now to Avoid Major Health Problems Later

Related: 7 Top Home Loan Options in Malaysia That Aspiring Homebuyers Must Check Out

4. Increase your income

Truth be told, mere cost-cutting may not be enough to build a down payment fund, especially if you have given yourself only a few years to raise that amount. You should seriously look for ways to boost your income — simply because more income means more savings.

Here are some useful tips:

● Partake in Malaysia’s thriving gig economy and generate some side income during your free time. Here are 8 Mobile Apps You Can Use to Make Money on the Side in Malaysia, and 10 Fun Ways to Make Extra Money Based on Your Personality

● Promotion opportunities giving you a slip despite hard work? Maybe you need to do a bit more than just sulk over it. Here are 10 Smart Tips to Get Promoted at Work which would also translate to a fatter paycheque

● Do you feel like you need to upgrade your skills or pick up new ones in order to bag a coveted promotion or land a better-paying job? Check out these 6 Websites for Affordable Online Courses to Advance Your Career and 6 Short-term Courses That Will Help You Increase Your Income

● Getting stuck at the interviews? Do read our 15 Smart Tips to Ace Your Next Important Interview

● Lucrative job offers not coming your way? Maybe you need to refine your job search. Here are 7 Tips to Enhance Your LinkedIn Profile and Improve Your Job Search

● A mundane 9 to 5 job not your thing? Here are 8 Job Platforms to Find Work from Home Opportunities in Malaysia and 10 Fun and Unique Work From Home Business Ideas

Related: 5 Top Eco-Friendly Residencies in Malaysia

5. Invest intelligently

You should also consider growing your income through investments in order to build your down payment fund. But since the stakes are really high as you wish to use the fund to buy your dream house, you need to assess the risk factor attached to your investments closely before taking any decision. To begin with, read our blog to understand investment risk and how to safeguard your wealth.

Each investment instrument — be it low-risk fixed deposits and ASB fund to high-risk mutual funds and stocks — come with its own set of risk and rewards and you need to analyse them closely in order to find your comfort zone.

Here are some pro-tips:

Research!: Put in ample research before making any investment. Don’t believe in hearsay. It’s only with proper knowledge and research will you be able to understand investment instruments, your risk appetite, investment ambit, etc. Read investment-related books, consult experts before taking a plunge

Set a clear investment goal: Set a clear investment goal (like raising X amount in Y years) to grow your core down payment savings and try to calibrate your investment options accordingly. You may want to consider investing a portion in a 3.5%-return fixed deposit, another in an 8%+ return ASB fund (only for Bumiputeras) and a smaller portion in more lucrative but riskier stocks, commodities or unit trusts.

Diversify your investments: The key is to diversify your investments into multiple instruments with varying degrees of risk and rewards in order to ensure your total fund stays afloat even if some risky option fails to provide desirable returns

Your hard-saved down payment fund will set you on course towards your life’s biggest purchase — your home. With the help of our tips, some smart planning and proactive financial management, you should be able to realise your dream soon. Here’s wishing you all the very best!

This article is a contribution by Lingan Rao of BankBazaar.

Do you think these tips are useful? Let us know below.


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Thanks for sharing tips