If you are taking your first step to becoming a first time homebuyer, you need to save for a downpayment. To get you started, you will first need to find out how your willing to pay for a home by checking our prices in your preferred neighbourhood. Next, use the Mortgage Affordability Calculator at CompareMyRates.ca to find out how much of a downpayment you will require. Once you have a number, you will have a goal to work towards. Remember it costs less to borrow if your down payment is at least 20%. The minimum down payment is at least 5% of the purchase price of the home, depending on the dwelling type. A low downpayment means you have a high-ratio mortgage and you will be required to purchase mortgage insurance from the Canada Housing and Mortgage Corporation (CMHC) at an additional cost to you, plus you will be paying more mortgage interest. Once you settle on the number, you can start looking for ways to save your downpayment on a home.
You will need to decide for yourself ways to save, so we’ve come up with a few money saving tips.
- Federal Programs to assist you save money for a down payment.
- You can choose a tax-free savings account (TFSA) to set money aside in eligible investment vehicles and watch those savings grow tax-free. Savings can get you on the road to build up a downpayment.
- The Home Buyers’ Plan (HBP) allows eligible individuals to make tax-free withdrawals from their registered retirement savings plans to purchase or build a qualifying home.
- Postpone vacations for at least 18 months
- Get more frugal by using coupons and planning to buy items on sale.
- Eat out less, brew your own coffee at home and bring you own lunch to work.
- Call your Cable and Internet company and let them know you want to pay less per month and find out how to reduce your bills.
- Pay down credit cards and use only for the purpose of building credit for when you apply for your mortgage. Some credit cards have great rewards like free movies, travel miles, cash back and more so you can save using credit cards if you use them wisely.
- If you are renting, think of ways you can downsize, or for the short-term, move in with a relative or parent.
- Put any extra money, such a bonuses, pay increase, commission, cash gifts etc. directly into a savings account or RRSP.
- Choose cheaper entertainment
- Free events in your town or city, check local paper
- Visit friends and family for an evening out
- Access social groups such as running, bird watching, dog walking, bike riding, or if you can’t think of any, there are some websites that post social groups such as Kijiji or Meetup.
- Instead of purchasing books and movies, check out your local library or pay less for used books and movies from your neighbourhood garage sales, flea markets, thrift stores or second-hand book stores
- Volunteer at local church, food banks, community centres or hospitals, you will save money and feel good.
When saving for your down payment, make sure you enjoy the time you have saving. It’s important to remember your life before homeownership is just as important as your life as a homeowner. You can still enjoy this time by thinking of fun ways to save; you may even find the alternatives better. When you’re ready to get your mortgage, compare the best mortgage rates at CompareMyRates.ca.