Five ways to save for a down payment for a house
Is home ownership a goal of yours? Beyond scouring home décor magazines and memorizing the MLS listings, there are certain, more pragmatic steps that you have to take to get there. You’ve probably thought about how you’re going to make mortgage payments, but have you planned out how to accumulate a down payment?
As of June 1 2015, high-ratio borrowers (i.e. borrowers who have less than 20 percent down) are subject to a 15 percent increase in CMHC premiums. While this may not seem like a big deal, amortize that over the life of your mortgage, with accruing interest. That can be big bucks.
Even more reason now to accumulate a sizeable down payment. So- get busy house hunters!
Do you have an RRSP? It’s not just for retirement. Did you know that, as a first-time homebuyer you are allowed to withdraw funds (up to $25,000) from your RRSP to use for your down payment?
You are allowed to take this money out, tax-free with the stipulation that you are required to repay it over the years to come.
Ditch your plastic
Credit cards are convenient, but balances (and the interest that accrues on them) have a way of accumulating. Think about it. If you are spending all kinds of extra cash, just to service that debt for the sake of convenience, wouldn’t that money be better spend going towards your down payment fund?
Embrace a cash-based lifestyle and stop accumulating debt.
If you don’t already, set up a savings account that is specific for your house down payment. Have a specific amount come off each paycheque.
When savings are done seamlessly like this, you don’t even notice. You will certainly notice the balance in your bank account as it grows though!
Change your current living arrangements
What about moving to a smaller apartment for a year and banking the savings? Alternatively, consider taking on a roommate to ease up your cash flow to fund your down payment.
Eliminate extra spending from your budget (think entertainment, eating out, cable, magazine subscriptions, etc.) and take that cash to boost your savings.
Yes- it is a sacrifice, but it is for the short term- and you are taking bigger steps towards your ultimate goal.