Top 7 ways how to save money to buy a house

9 min read • Updated 6 November 2022
Written by Prateek Agrawal
Tips on how to save money to buy a house

A house is often more than a necessity or a shelter. It is one of the most priced and cherished possessions of an individual. However, in the present scenario, with real estate prices shooting up in India, you must have a detailed and well-laid-out plan to save enough for your dream home. 

When it comes to saving for a property, funds may seem short, even if you’re earning well. This could be because your finances are not well managed. This article will help you learn about the ways in which you can save money for your house.

How Much Money do you Need to Save to Buy a House?

Before understanding how to save money to buy a house, you should be aware of how much money is needed for it! Although there are no definite answers to this question since property prices are simply affected for too many reasons, you can make a rough estimate.

Firstly, you need to consider two basic factors: where to buy a house and when to buy a house. 

Secondly, since buying a house incurs overhead costs apart from the price of the property, you must consider the following:

  • Processing Fees: If you consider taking a home loan, you will need to pay processing fees, including costs incurred by the lender to conduct credit checks, document verification, etc. 
  • Stamp Duty: Stamp duty is an additional cost you incur when you purchase a property. It is a legal tax that is levied by state governments and the rates of stamp duty vary from state to state. 
  • Brokerage Fees: If you are planning to hire a broker to help you find a house, you will have to pay him/her a brokerage fee.
  • Maintenance Costs: You must keep a separate sum of money for maintenance repairs and getting new house installations. 
  • Appraisal Fee: The money lender usually charges an appraisal fee to verify the property’s market value and guarantee the bank that it is worth the loan amount. 

You must prepare a rough estimate of the amount you need to invest, considering all these costs mentioned above. In case you are planning to take a home loan, you need to save around 20% of the property’s market value to make the down payment. Setting the target a little high would help you stay on the safe side.

How to Save Money to Buy a House?

According to an RBI report, the average housing price in India was 61.5 times the average Indian’s monthly income as of March 2019. A higher ratio indicates that housing has become less affordable in cities all over India. 

But does that mean you cannot buy a home? Absolutely not. You need to develop a systematic approach to saving as a reliable and stress-free option to buy a new home. 

So, if you have no money saved, and you want to steer away from the huge property EMIs, then listed below are some of the best ways to save money to buy a home: 

1. Build a Budget

The first and foremost step in your saving journey should be budgeting. You need to analyse your income and expenditures and calculate how much you spend. It will also help you identify necessary and unnecessary expenses. Through this analysis, you can reduce your expenses and create a realistic budget for yourself that will help you save enough money to buy a house.

2. Start Investing Early

A dream takes time and effort to transform into reality. So, if you dream of owning a house and are worried about how to save money to buy a house, then you need to give it time and take concrete steps to fulfil it. 

You need to start by investing. For instance, you can start with small investments in FDs, Mutual Funds, and Bonds, so that when the time comes to buy your own house, the decision doesn’t look so daunting. If you start investing early, accumulating a lump sum amount will be a gradual process rather than burdensome. Further, staying invested for a longer time will also offer the benefit of compounding. 

3. Have a Diversified Investment Portfolio

Another way to save money for your house is by diversifying your investment portfolio. You should invest in various financial instruments depending on your income. You can easily invest a part of your monthly income in mutual funds with the help of a SIP (systematic investment plan). 

You can also invest in digital gold or the stock market based on your financial risk appetite. Diversifying your portfolio reduces the risk and enhances your profit. Moreover, you do not have to begin with a massive investment. Remember, Rome wasn’t built in a day. Irrespective of what investment plan you take, it is best to run them through your financial advisor for the best results and cut down risks. 

4. Cut Down on Your Expenses

If you are worried about how to save money when buying a house, then downsizing your expenses can prove to be the most effective way to lessen that nagging guilt of not being able to save enough. You might often squander money without thinking much. Extravagance is a way of life, not a necessity. So, you can substitute an extravagant lifestyle with minimalism. Practice the mantra “simple living, high thinking”. Focus on your long-term goal – that is, to buy a house. 

You can make conscious decisions to eliminate any bad habit. It might save you a lot of money. For instance, you can check your impulsive buying tendency or a tendency to eat out frequently and divert this expenditure to build up your down payment fund. 

5. Look for passive income avenues

Today, there are several ways in which you can generate a decent passive income. The following passive income ideas could be just the answer to your question of how can I save money to buy a house. 

  • You can sell stock photography if you have a passion for clicking pictures. 
  • You can take up a part-time job as per your working schedule to supplement your monthly income. 
  • You can start a blog or a YouTube channel, and once it reaches a targeted number of subscribers and views, it will start generating revenue.

Read our guide on how to earn money through passive income

6. Get your debt under control

If you’re in debt, you need to postpone your plan to buy your dream house. Adding a home loan to the existing debt will likely worsen your financial condition. You should take one step at a time and clear a significant chunk of your existing debts before taking another loan. . Remember that about 30% of your credit score depends on the amount of debt you owe; hence, unpaid debt will lower your credit score, making it difficult for you to seek a loan.  

7. Monetise your other assets

Monetising some of your other assets can help you save more for your house. Some of the ways to do this are:

  • You can either liquidate your fixed deposits or take a loan against your FD amount.
  • You can also withdraw a part of your employee provident fund (EPF).
  • You can consider borrowing against a life insurance policy, where you might be able to avail up to 85-90% of the surrender value as a loan amount, depending upon your insurance company’s terms and conditions. 

Concluding Thoughts

The aforementioned guide to saving money will resolve your concern about how to save for a home. You must be willing to compromise on excessive luxuries and expenditures if you are committed to your dream of owning a house. However, this doesn’t mean you have to live miserly.

You can cut down on frequent visits to expensive restaurants, put a check on binge-buying clothes, or give up on a long and expensive vacation. You need to remember that planning is the key. 

Strategic planning will ease your road to saving enough money for your dream house. The answer to the question of how to save money to buy a house might seem challenging at first, but with consistent and mindful efforts, you can achieve your goal.


What is the 50-30-20 rule for saving money?

The 50-30-20 rule is a simple budgeting rule. According to this rule, you need to break down your monthly in-hand income into three parts: 50% of your income should be spent on your needs, 30% on wants, and the rest, 20%, should be kept aside for investment.  

At what age should I start saving for a house?

There is no right age to start saving money. It would be best if you began as early as possible. You can start with a small amount and increase the amount gradually as per your financial growth. Moreover, investing will help you earn a decent passive income that will help you save enough money for your house. 

What are some common passive income ideas?

The following are some of the passive income ideas:
1. You can sell retail products at a lower price online and then sell them at a higher price to make some profits. 
2. You can invest in dividend-yielding stocks and receive payments at regular intervals. 
3. You can rent out your space to tenants. 

How can I automate my savings?

You can automate your savings in the following ways:-
1. Keep a certain amount of money as savings. 
2. Harness technology to track your savings and spending.
3. Set both long-term and short-term saving goals.
4. Choose a savings account that will cost you minimal fees so that a negligible amount is deducted from the interest you’re earning. 

Was this helpful?

Prateek Agrawal

Investment Principal
Prateek is an investment professional with a demonstrated history of working in Debt Capital Markets and wholesale funding to the Corporates. He has more than 9 years of experience in Treasury and Wholesale lending to more than 50 Institutions across India. He is currently working as an Investments Principal at Wint Wealth.

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