I just wanted to take a sec and share a little bit of information as you are getting ready on your homebuyer’s journey. I get asked all the time what are some great ways to save money for a down payment. It is a good question and I thought I would share
5 8 great ways that I believe are the best:
- Set Financial Goals
- Identify where you are spending too much
- Pay off your high-interest debts
- Save your money in a TFSA or your RRSP
- Put away every bonus
- Make saving automatic
- Downsize your current housing
- Sell your car
Set Your Financial Goals
Get every in your house to agree to your new financial goal. Make sure you stick to it, if you don’t – they (likely) won’t either. If you are used to living paycheque to paycheque, try to reach your goals of having some money left over from the last paycheque when you get your next paycheque. That way you can start to save for your down payment little by little.
Identify where you are spending too much
Some of us dine out a lot (I am guilty of this one), others have expensive hobbies or enjoy luxury in clothes. Where ever you identify that you are spending too much, start correcting and make new plans of action. If you are honest with yourself, you will start to save, if you deny your weaknesses it will only delay your homeownership goal. I am not saying that you should cut it out completely (we are only human) but give yourself a lower budget. For instance, if you spend about $400/month dining out friends, limit yourself to $200. You can then put that $200 per month into your savings for your down payment.
Pay off your high-interest debts
This starts with your credit card. PAY OFF THE TOTAL, NOT JUST THE MINIMUM PAYMENT. The more you pay off these debts, the more you will save on the interest. Once the debt is paid off, those dollars can now go towards your down payment.
Pro Tip: Keep saving because this extra money that you have identified can go towards paying off your mortgage sooner with higher payments. This can potentially pay off your mortgage tens of thousands of dollars sooner.
Save your money in a TFSA or your RRSP
Your tax-free savings account (TFSA) can earn interest on your savings here without having to pay any income taxes on it. Just like your credit card but the opposite way. Your Registered Retirement Savings Plan (RRSP) the amount that you put towards it each year is deductible from your taxes. This helps you save money by reducing your taxable income for that year, which allows you to pay less tax now.
Pro Tip: You can withdraw up to $35,000 ($70,000 for a couple) from your RRSP and put it towards your down payment. Just make sure it is in your account for at least 90 days and remember that you have to pay it back over the next 15 years.
Put away every bonus
Congratulations! You received a bonus! Please don’t buy anything with it, unless you absolutely must (sorry about that). Put your bonus money into your savings account faster than you can even think about spending it. Then BAM instant savings!
Make saving automatic
We live in a time that you can set up your online banking account. If you set this up to make automatic transfer after payday to send a certain amount of cash from your chequing account to your savings account, you can set it all up and not even think about it anymore.
Downsize your current housing
If you’re currently paying high rent in a large unit, consider downsizing and saving the difference in rent every month. This is tough in Vancouver but if you can this can really help. Another solution could be getting a roommate, which can cut your rent in half!
Sell your car
This one is a tough one, if you are actually close enough to work and ride a bike/walk/transit etc you could do that instead of driving. Downtown parking is expensive and not to mention rising gas prices. If your partner has a car perhaps you can make do with only one vehicle. If you need to drive, perhaps downsize to a smaller vehicle that is more fuel-efficient and lower your insurance. The savings can go directly to your down payment. If you can sell your car put that profit right to your down payment and watch it grow.
For more information feel free to contact me. I can give you a few tips and some help for you to save. I am happy to help find your mortgage solution. Call me anytime at 604-202-9913 OR email me at [email protected]