Sunday, September 11, 2016

Hot Wedding Trends: Crowdsourcing the Down Payment for a Home

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In the past, before couples started living together prior to getting married, they had a real need for toasters, towels, dishes, salad bowls, and similar things as wedding presents to help get them started in their new life together. 

Today’s couples are very different. 75% of them live together before tying the knot, and many have been together for years as the big day approaches. These happy couples already have homes filled with as much stuff as they can ever want or need.

What do you get the lucky couple that already owns enough traditional wedding presents to fill an entire house? An intelligent way to solve this problem – that creates a unique opportunity for the happy couple – is to set up a registry online. This registry will allow family members and friends to donate money toward a down payment for a home in lieu of traditional wedding gifts that are no longer needed.

The Biggest Drawback to Receiving Donations for a Home Down Payment
In most cases, the one drawback that the future married couple and soon to be happy homeowners face is that many of the crowdfunding websites charge the donation recipients hefty fees for their services. 

For the most part, crowdfunding websites charge a percentage of the total money donated. It appears that the bulk of these websites charge around 5% to 6%. Although this is less than the sales tax that you’d typically pay buying traditional wedding gifts in the majority of states, it is still way too much money to just give away.

As an example, let’s assume that our happy couple has 100 guests attending their wedding. On average, each person will roughly spend $100 per plate in the form of a gift. Instead of asking for a different version of items that they already own, the future married couple can direct family members and friends to a crowdfunding website as an alternative.

If each person donates $100, the couple will have $10,000 available for their down payment. 

Wait… Not so fast. We forgot to deduct the 5% (could potentially cost more) that the crowdfunding website charges to accept the donations on their behalf.

So instead of getting $10,000 for a down payment, the couple has to pay the crowdfunding website $500 in fees. They are left with $9500, which is still plenty of money. But it could and should be more.

Free Crowdfunding Websites are a Better Alternative
If our future married couple did their research, they could have saved $500 more for their down payment by choosing a site that does not charge hefty percentage fees. Easy no cost fundraising is possible if you know where to look.

Our favorite no fee crowdfunding website is called Plumfund.
After all of your wonderful gifts begin hitting the registry, it’s important to keep track of the contributions that have been donated. Mortgage companies need to know that this money was actually donated instead of a loan that must be paid back at some point in the future.
Before creating an online registry, it’s wise to discuss this with your lender. Find out if there are any rules that you need to follow specific to your precise situation.

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