Are you dreaming of your own home—but don’t have your funds in order yet? If you’re like many prospective buyers, you may be having difficulty saving up for a down payment. With house prices rising, it can feel nearly impossible to get over this initial hurdle. Fortunately, it doesn’t have to be that way. By taking the right steps, you can ramp up your saving efforts.
Here are five ways to start saving for your down payment today…
1) Find where you can cut back
It may seem obvious, but few people hoping to save money actually look closely at their spending. That means scrutinizing your bank account. Are you ordering takeout twice a week? Have you done a little more online shopping in the last few months than you would have expected? What about those little impulse purchases at the grocery store? For that matter, many families spend way more on food than they need to—so pay attention to what you’re throwing out, too.
Once you know where you’re overspending, you can make a real, conscious effort towards avoiding it. If you’re successful, you may be shocked by the amount you can save—and put towards your down payment.
2) Pay off your credit cards
It’s pretty much impossible to save when you’re paying large amounts of interest. That’s why eliminating your credit card debt is a crucial early step in saving for a down payment. The key is to start with your smallest, high-interest debt. Tackling that should feel pretty good. From there, work on the one that has the second-highest interest. Continue this pattern until you’ve taken care of it all.
Of course, that’s easier said than done. Fortunately, if you’re making lifestyle changes to save money, you should have a little more in your budget each month. Until your debt is paid off, that’s where this extra money should go.
3) Say goodbye to one of your cars
Does your family have more than one vehicle? If so, you may want to consider selling it. This may seem like a drastic step, but keep in mind how much you’re trying to save. It’s not just the money the sale will bring in that you’re after. You should also think about how much you’ll save when you’re not making car payments—or covering insurance, gas, and maintenance.
By walking or taking transit, you could wind up with thousands of extra dollars a year. That’s money that can go straight towards the home of your dreams!
4) Use your RRSP
Through the Home Buyers Plan (HPB), first-time purchasers can withdraw $35,000 from their RRSP for a qualifying home. When you’re saving for a down payment, that’s more than a drop in the bucket. If this strategy makes sense for you, but you still have a considerable amount to save, you may want to start contributing to your RRSP.
There are, of course, a few restrictions. The biggest is that you have to pay back what you take out within 15 years, or you’ll be penalized.
5) Open a TSFA
Maybe you have a Tax-Free Savings Account (TSFA), but many Canadians don’t. They’re actually great savings vehicles, which means having one is a good idea if you’re saving for a down payment. Like an RRSP, this type of account allows you to make an investment and watch it grow, tax-free. Many people opt to have a portion of their paycheck automatically deposited in their TSFAs.
There is one major downside. The amount you can contribute each year is fairly limited (in 2021, it’s $6000). That said, it all adds up—and a TSFA is another way to save.
Almost at your goal? Check out the latest local listings, or get in touch to learn more about buying a home with our team!
