Saving for a down payment

Even if renting makes sense for you now, it’s still smart to save for a down payment on a house or condo. Buying a home is probably in your future some day, and the more you have as a down payment, the less you’ll have to borrow or the more house you can buy.

Plus, if you make a down payment of less than 20% of the price of your home, you will probably have to pay for private mortgage insurance, or PMI. This adds to your monthly housing costs. You usually can’t stop paying PMI until you have at least 20% equity, or ownership, in your house.

So how do you save for a down payment? The way you save for anything else. Put yourself on a thrifty budget and sock money away each month into a designated account for your future home. You might consider putting your future down payment money in a low-risk type of investment, such as a certificate of deposit. This way you won’t be tempted to spend it on something else, like a vacation, and you won’t risk losing any of your original investment.