Can You Really Save For A Down Payment With Just 10 Bucks A Day

Dated: 07/09/2014

Views: 1098

I came across and interesting article on Business Insider today. Let me know what you think on facebook!

Here's How Long It Will Take To Have A Down Payment By Saving $10 A Day

Author: LIBBY KANE
Buying a home is one of the biggest financial commitments most of us will ever make. According to the Census Bureau, the median price of a home in the United States in 2010 was $221,800. Bearing in mind that, ideally, you would have a 20% down payment, that means you'll need to sock away $44,360.Relatively few of us have that kind of money idling in our savings, but most of us could manage to unearth a smaller sum from beneath the proverbial couch cushions. Say ... $10.If you were to save just $10 a day for that $44,360 down payment, how long would it take?To figure it out, we used an online compound interest calculator to simulate two savings methods:

1. The high-yield savings account

The first is a high-yield savings account like the one offered by Ally (you can find it through Bankrate), with an interest rate of .87%, compounding daily.With this account, it would take you between 11 and 12 years to save a down payment. At 11 years, you'd have $42,137; after 12, you'd have $46,170.
chart down payment 87Business Insider

2. The investment account

Now, here's a twist: If you're putting the money you plan to spend on a home in an investment account rather than a savings account, your money could potentially grow much faster. Although, since it is invested, it's not a sure thing. If you were to invest your money in a portfolio with a conservative 4% annual return, it would take you about 10 years to save a down payment. At the 10-year mark, you'd have $44,756.(For the record, if you were to have a more impressive 6% return on your investments, it would take a little over nine years to save a down payment. At nine years, you'd have $43,278; after 10 years, you'd have $49,650.) 
chart down payment 4

SUMMARY
Yes it is possible to save up for a down payment using this method. However, with so many different options for loan programs you most likely will not have to save up 20% for a down payment. With good credit you will also qualify for more favorable rates on your loan, with a low down payment as well.
Already have your down payment saved? Start you home search now here.
Do you already own a home and want a free instant home value estimate? Click here.
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6 QUESTIONS TO ASK YOURSELF BEFORE BUYING A HOME

Your parents did it. Your friends are doing it. But how do you know if you’re ready to buy a home? The decision to become a homeowner is a personal one that must be based on your life situation and finances. Ask yourself these six questions to determine if you’re real estate-ready....
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Sheryll White

As a Full Time real estate agent for the past 23 years, Sheryll has helped hundreds of home owners in Colorado buy and sell their homes. Sheryll's easy going, no pressure style and her in depth knowl....

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