You dream of buying a home, but you wonder how to save the thousands of dollars needed for the down payment.
We agree, it’s not easy (in the early days at least!). However, when we analyze the situation, we quickly find solutions. Here are our tips for getting started!
How much does it take to accumulate?
At first, you need to evaluate your situation, your needs and determine your goal. It is much more motivating to save money by having an amount to be paid than to set aside for “later”. To get an idea of ??the amount to accumulate, look at the price of homes in the area where you want to buy.
Find properties with the features you are looking for (lot size, number of rooms, proximity to schools, transportation, etc.) and calculate an average. If the average is $ 320,000 and you want to raise 5% of the value, you will need to accumulate $ 16,000.
The down payment amount influences your mortgage in two ways:
Obviously, the higher your down payment, the less you will have to borrow. Your down payment allows you to reduce your repayments.
The percentage paid out has an impact on your expenses: if your down payment is less than 20%, you will have to take out mortgage loan insurance.
In your calculations, also consider other expenses related to the purchase, such as transfer tax, notary fees and other one-time expenses.
Saving longer or taking out mortgage insurance?
Since it is possible to buy with only 5% down payment *, it is wise to ask whether it is better to pay for loan insurance or to save longer to reach 20%. To see clearly, your broker Multi-Loans will be happy to help you do this calculation.
In the exercise, one must look at one important thing: the anticipated rise in house prices in the coveted sector and the rise in interest rates. If the area has undergone little change lately, it may be ok to wait. On the other hand, some cities or neighborhoods are experiencing significant increases in property values.
Of course, no one can predict the future, but some indicators can help make informed decisions.
The numbers are important here, but do not just consider the amount you have to pay to make your decision. The quality of life that a house brings is also worth its weight in gold!
Tips to build your down payment
Before you tighten your belt, look at all the options available to you regarding sources of funding. For example, your RRSPs can be used as a down payment, as can your investments in a TFSA. You can also complete your down payment with a donation or loan.
Once you have determined the amount to accumulate, here are the steps to follow:
Budgeting: Analyze your current spending and systematically question it. If you take a $ 3 coffee every day at work, it’s $ 720 that you swallow every year! Of course, it’s not the coffee that will change it completely for your down payment. The key here is to establish how much of your income you will be able to give to your mortgage payments based on the desired lifestyle.
Manage your debts: Clean up your finances to reduce your expenses. Limiting the amount of creditors will help you see clearly and make better decisions for the future.
Adapt your habits: Do you need a gym membership of $ 45 a month? Could you take public transportation? Make a less expensive trip? List the changes that are realistic to implement in your life. Overly restrictive compressions could affect your enjoyment of living in your new home.
Easier than you imagine!
Raising the down payment for your first home may seem like a challenge, but there are several ways to make things easier. Remember that you can access the property with 5% down payment.
Do not hesitate to call on our expertise to accompany you!