The first step on the path to homeownership is saving your downpayment. Purchasing a home will often be the largest investment you make, and saving for the downpayment could be the toughest goal to reach.
Knowing how and where to save the money needed for a downpayment can allow you to get to purchasing your new home quicker.
Keep it in the Bank
Starting a savings account can help keep your money safe while allowing you to earn some extra money through interest. Keeping your savings in a different bank than your usual spending account can be useful as well, making it a little harder to transfer money from your savings account to your spending account therefor stopping you from impulse buying, especially when you have a large amount saved. It will also be useful when it’s time to use your down payment since the money can be easily certified by your bank. In Canada, mortgage lenders are required by law to obtain your ID and occupation details to ensure the property is being purchased without suspicious activities and the paper trail associated with having the money in a savings account will save you from going through any unnecessary red tape.
Automate your Savings
You can also set up your savings account to have automatic payments come out from your paycheque. The key is to lock down this account and let it build up over time. This will help you save and accumulate money much faster, while teaching you discipline with your savings. Try starting with 10% of your income and adjust over time. You will barely notice the deduction and will be surprised at how quickly the money will grow.
Use your RRSPs
The Home Buyer’s Plan makes getting into your first home easier for many Canadians. The program allows first-time home buyers to take money out of your RRSP’s and use it towards your down payment with zero tax penalties. You just need to ensure you pay the money back into your RRSP within 15 years. In 2019 the amount available for withdrawal through the program increased to $35,000 per person. Combine that with a partner and you have $70,000 towards your downpayment.
Skip Expensive Purchases
With our long Canadian winters, you may be dreaming of escaping on a trip to work on your tan. That one week all-inclusive trip to Cancun can cost you and your family thousands of dollars that could have been saved for your downpayment. Try using cost-effective outings instead like a stay-cation, camping trip or a visit to a friend’s cottage and focus on needs over wants. If something doesn’t need to be purchased, try to avoid it. You will be surprised how much money you can save. You can also save faster if you shed any items with monthly bills that you are barely using, such as a second car, or a cable bill.
Save the Extras
Tax refunds, raises, bonuses – all the extra incomes should go straight into your savings account towards a home. These can give your savings a quick boost, pushing you towards your goal much sooner.
Don’t fool yourself into thinking you need to wait years to purchase a home. Just get your savings in gear, keep it up and be committed. By performing some of these simple steps, you can be in your dream home faster than you think. To learn more savings tips or to discuss strategies to get you into your new home faster, contact Bailey Coats today.