Is purchasing a home a goal just over the horizon for you? The thought is so exciting you can barely sleep at night. Soon, you’ll have a place you can truly call yours, where you can experience a long list of firsts while creating lasting memories. Perhaps this will be the home you grow old in, but let’s not get ahead of ourselves!
A lot can change in life, but buying your home is always a worthy milestone. In today’s market, though, it’s likely going to be one of the most expensive things you’ll ever do. This is doubly true in Toronto, where real estate values have risen over the years.
Nevertheless, there are still opportunities to get into the market. The sooner you do, the sooner you’ll start enjoying all of the financial and emotional benefits of being a homeowner. Saving money for your down payment and deposit is the first step. Here are a few tips for how to come up with a down payment for a house – as fast as possible in today’s market.
What should you look for in your next home? Our Buyer’s Guide can help you navigate today’s market to find the perfect house in Toronto’s West End. Download your copy for free right here.
Prioritize
It wasn’t long ago that adults had one tidbit of advice for younger people hoping to get into the market. “Just stop spending so much money on avocado toast!”
These days, this saying is a little outdated, to say the least. Toronto real estate prices are high, and no one in the world eats that much avocado toast or drinks that much coffee! Real-world advice for today’s market can’t be summed up in a tidy catchphrase.
Saving for a house is challenging, and it has to be at or near the top of your priorities if you want to make it happen. This can mean cutting down on unnecessary expenses and taking fewer vacations.
Start by identifying anywhere in life you can save money, even if it’s just a little bit. A few dollars here and there may not seem significant, but it will really add up over time. A budget is the perfect way to do this – it will help you see how much you are spending and where you can cut back.
Why consider buying your home in Toronto’s West End? The posts below might convince you:
- Our Top Activities for Retirees in the West End
- Discover the Wonderland of Family-Friendly Parks in Toronto’s West End
- Keeping Cool In The West End
Create Clear and Realistic Goals
Saving for a down payment takes time, so create a realistic goal – and start as soon as you can. First, calculate how much money you might need, and then try to cushion that budget as much as possible.
What is the minimum down payment for a house in Ontario? The good news is that the new down payment guidelines make getting into the market more accessible for first-time buyers. The requirements are tiered depending on the price of the house.
- 5% on the first $500,000, or $25,000
- 10% on the amounts from $500,000 to $1.5 million (Previously, this was capped at $1 million, which made the initial down payment harder to achieve.)
- 20% for purchases $1.5 million or more
If you decide on a $500,000 condo, your down payment will be $25,000. Not that this is a small amount of money, but it’s achievable if you start saving consistently.
A more expensive home will require a larger down payment. According to the chart above – and our down payment calculator here, you would need $45,000 when buying a $700,000 property ($25,000 on the first $500,000 plus 10% on the remaining $200,000).
Breaking your goal down into smaller targets can make saving seem less overwhelming. Aim to set aside a realistic amount every week or two. If you’re starting very young and are in no rush, once a month might do the trick.
Leverage Your Investments
It can be difficult to figure out how to save money for a house through savings alone. Your nest egg can grow much faster when you leverage any investments you may have. The federal government has plans in place just for first-time home buyers.
First Home Savings Account
As soon as you turn 18, you can open a First Home Savings Account. You can invest up to $8,000 each year to a maximum of $40,000 towards your home. Though your savings are limited, the investment profits can add up. Presuming a healthy annual return, this can be a much faster way to accumulate funds to buy your home. After your purchase, you simply withdraw or transfer any leftover funds and close the account, with nothing to repay.
Home Buyer’s Plan
Canada offers a Home Buyers Plan, a program that allows you to withdraw up to $60,000 in a calendar year from your registered retirement savings plan to buy (or build) a qualifying home for yourself. When buying with a partner who is also a first-time buyer, you can each use the plan to cover your down payment. The one catch is that you must repay those funds to your investment account within 15 years.
Supplement Your Income
Telling someone at the beginning of their career to “just earn more money” is another piece of advice that is easier said than done. But once again, every dollar counts, especially when you begin saving early.
Picking up an extra shift here and there can put your goal in motion. If you’re really ambitious, perhaps you can turn your favourite hobby into a profitable side hustle.
Improve Your Credit
A positive credit rating is critical if you’re serious about buying a home. Too many debts can impact your credit score if you fall behind on any payments. If you apply for a mortgage with too much consumer debt, chances are you won’t qualify.
Now is the right time to pay those debts off. Start with your smallest high interest loan. Once it’s paid in full, direct those funds to pay off the next debt with the highest interest rate. It’s like a snowball effect. Becoming debt-free may seem slow at first, but you can be in the clear if you follow a consistent system.
Looking for more tips for a successful purchase? Look no further than the posts below:
- 5 Little Known Things to Look For When Touring a Home
- 5 Questions to Ask About a Home Before Making an Offer
- Could a Cosmetically Imperfect Home Be the Best Choice in Toronto?
Tax Refunds
Any refunds from your income tax should go toward your down payment savings. In the end, it’s almost like “found” money. Why not make good use of it and save it? Better yet, contribute these funds to your First Home Savings Account and watch your investments grow.
Saving for a down payment won’t happen overnight. Nevertheless, you’re well on your way once you start following these few steps. Keeping your vision of your home in mind will help you stay motivated.
If you’re looking to purchase a home and have any questions, please give our West Toronto real estate agents a call at 416-769-3437 or email info@sidorovainwood.com.
