The good news about a down payment is that it's much less than the full price of a new house. The bad news is that it's still a large chunk of change! If you need tips on meeting the demands of your down payment, here are just 13 ways to save.
1. Crunch the Numbers
How much do you make in a year? Where is your money coming and going? How much would you need to save to afford a down payment in three months, six months, or nine months? Look at both your annual gross income and your monthly cost of living. The latter will need to be slashed to make room for home-buying costs.
2. Track Your Expenses
If you aren't already tracking the money that leaves your bank account, now is the time to start. You might be surprised by how much your morning mochas are killing your budget! If you need help counting these daily and weekly expenditures, there are plenty of apps, calculators, and fill-in-the-blank forms on the web.
3. Borrow From Your RRSP
Certain programs will let you borrow up to $25,000 from your Registered Retirement Savings Plan (RRSP) and apply it towards buying or building a home. You'll need to pay it back eventually, but if your growing family needs a home sooner rather than later, it can be an easy way to make your down payment.
4. Cut Back On Everyday Expenses
If you have cable, cut it off and live on streaming services for awhile. If you're an avid reader, start haunting the library instead of the bookstore. Little changes like this can result in big savings down the line, so don't underestimate the impact of your everyday spending habits. You might even find that you enjoy the feeling of being thrifty.
5. Look For a Different Mortgage
Conventional mortgages usually require a down payment that's around 20 percent of your total property costs. If you qualify for an insured mortgage, however, your down payment can dwindle to as little as five percent. You'll need to talk to the professionals to learn more, but it's something to mull over.
6. Reconsider Your Transportation
Getting rid of your car will also get rid of its need for gas money, maintenance money, and insurance money. You can still take the bus or ride a bike to work so you won't suffer anything more than a minor disruption to your routine. If you don't mind your co-worker warbling along with the radio, you might even carpool.
7. Settle Your Debts
If you owe any money to banks or credit card companies, you should pay them off before embarking on another big financial journey. Not only will it bring you peace of mind to finally settle the score, but you'll also qualify for more generous home loans without outstanding debts looming over your credit history.
8. Play Safe With Your Money
It might be tempting to double your money with an investment opportunity, but what if the investment fails? Your dream of a new home will slink further out of reach. Especially for big, important expenses like a down payment, it's better to stick with the tried-and-true methods of saving money. You don't want to gamble with money you can't afford to lose.
9. Look for Tax Credits
There are things like the First-Time Home Buyers Tax Credit that can soothe some of the sting of your down payment. While they won't cover all of it, they can be useful gains in a long-term savings plan. You can thank Canada's "Economic Action Plan" for the savings!
10. Ask Immediate Family for Help
If grandma is willing to help you out with your first home, her money will be considered a "gifted" down payment. Just know that there are certain hoops you'll have to jump through to keep everything legitimate. For example, the money will need to be deposited in your bank account before the closing of the property sale, and you might need a "gift letter" from grandma verifying that it's a present and not a loan.
11. Save Your Windfalls
Whether it's income taxes or a holiday bonus from work, a financial windfall can mean great things for your down payment. Not only will it shave off a few months of scrimping and saving, but it will also become an energizer for your ultimate goal. You're getting closer and closer to owning a home!
12. Sell Your Belongings
This serves the dual purpose of putting more money in the bank while also cleaning out your closets in preparation for your move. The more you're willing to sell, the more cash you can dedicate to your down payment. Think less about minor things like clothes and toys and more about big-ticket items such as televisions, kitchen appliances, and electronic gadgets.
13. Open a Savings Account
You'll earn interest on any cash you store in a savings account, and while it might not be a lot, it's still money that can be applied to your down payment. You can even look into special tax-free savings accounts where you won't be charged by the government for growing your funds.
Saving money isn't easy, but it'll be worth the effort when you first walk through the doors of your brand-new home. Use these tips to make tightening the purse strings a little easier as you daydream about a brighter future.