With today’s soaring housing costs, it is more important than ever to develop a long-term plan to save up for a down payment. A 20% down payment for a first-time buyer can be daunting but can be done if the following are kept in mind.1. Prioritization and Lifestyle
A new car? Expensive vacations and fancy dinners? These are nice things but the prioritization of setting money aside is a critical first step if you have decided to save up for a down payment. Adjusting your lifestyle, finding cheaper alternatives to normal habits, and cutting back on unnecessary spending will go a long way.
2. Get rid of a car
Cars are a huge expense – costing $9,000 per year for the average person. Saving money for a down payment will become much easier if you can take public transit, bike or share a car with a spouse.
3. Pay off existing debt
Credit card debt can cost a lot of interest. Paying these off will save money in the long run and is required by many financial institutions before mortgage is approved.
4. Borrow from an RRSP
If you have an RRSP, you can withdraw up to $25,000 from your account. This can be a great way to get extra cash for a down payment, but it needs to be paid back within 15 years.
5. Use First Time Buyers Programs
There are multiple home buyers programs that will provide relief for first time buyers. The GST/HST new housing rebate allows an individual to recover some of the tax paid for a new or substantially renovated house. Another program is the First Time Home Buyers’s Tax Credit which provides up to $5,000 to first time buyers.
Buying real estate takes persistence. Saving for a down payment can become a more attainable goal by following these steps and learning about available programs.