Purchasing a home is one of the most exciting things in life. You get to finally live in a home that you can call yours, where you can create long lasting memories and grow old in. But it’s also most likely going to be one of the most expensive things in life. The first payment you’ll be making in a home transaction will be the down payment. Here are a few tips for those who are looking to effectively and systematically save up for a down payment.
If saving up for a home is something on the top of your priority list, it’s a good idea to also rate any other priorities. If you tend to go on vacations a lot, it would be a good idea to cut down a bit on the trips to focus on putting aside some money for the down payment. Identify areas in your life that you can cut back on so that more money is put into your savings. A budget list is the perfect way to do this – this will help you see how much you are spending and how much you should cut down on.
Create Realistic Goals
It will most likely take some time to save up for a down payment, so create a realistic goal. Break your goal into smaller targets that are more doable. Aim to set off a realistic amount every week or two – for those of you who are in no rush, go with once a month.
Work, work, work!
Being that this is a financial goal, generating additional earnings can definitely be super helpful. Again, if this is a short-term goal that you’d like to finish as soon as possible, looking into additional shifts to supplement your regular income can definitely help save a little extra money.
Pay Off Debts
One thing that can definitely slow down your saving plan is having any debts. Now is the right time to pay those debts off. Start with your smallest high interest debt. Then take the minimum payment from the debt and use it to help you pay off the next small debt that has the highest interest rate. It’s like a snowball effect. If you try to apply for a mortgage with too much consumer debt, chances are you won’t qualify. So, to qualify for one, all and any credit cards and debts must be paid off.
Consider a Tax-Free Savings Account
A tax-free savings account will keep your down payment savings separate from your monthly operating expenses and also out of reach. The money can grow tax free in this account. This means you won’t have to pay income tax on the money you earn as it grows in this account.
Get More Info from the Home Buyer’s Plan
The CRA offers a Home Buyers Plan which is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plan to build a qualifying home for yourself. From time to time some cities have programs where they provide new home buyers with part of their down payment for their first home as an interest free loan. You can check with your city hall to see if your city has any sort of program like this to help first time home buyers. The money is repaid without interest over a set number of years.
Any refunds from your income tax should be put toward your down payment savings. In the end, it feels like found money every time so why not make good use of it and save it?
Saving for a down payment definitely won’t happen overnight. So, cut down on that avocado toast and follow these few steps and you will definitely be steps closer to being able to put in a down payment on that home you’d like to calls yours! If you’re looking to purchase a home and have any questions, please feel free to give us a call!