How to Save for a Down PaymentBy Caitlin in Mortgage
Purchasing a home, whether it’s your first or fifth, can be both an exciting and stressful time in your life but for many it’s also the ultimate achievement. Being as prepared as possible is probably the most important step in the home buying process, this of course includes saving for a down payment. The average Canadian typically believes that they must save tens of thousands of dollars before they can even think about looking for their dream home. While having a sizable down payment is extremely important, a down payment is usually more affordable than you’d think.
There are several of steps you can take to help make sure you’re both saving the right amount of money while being able to purchase your home as soon as possible.
10 Tips for new home buyers, here.
Your number one goal is definitely to purchase a home, but unfortunately that goal tends to seem rather large and out a reach when you first set it. This is why it’s important that you set a few smaller goals to help you move the process along and guarantee that you’ll have your down payment before you know it.
So what should these smaller goals be? Technically whatever you want then to be as everyone’s home buying journey is different, but if you’re looking for some inspiration here are a few helpful goals to set:
- Set up an automatic weekly or monthly transfer to your savings account.
- Cut back on eating out or create a meal plan so you’ll be more likely to eat at home.
- Set a monthly savings goal that is higher than you want it to be, you’ll feel amazing once you’ve achieved it.
Whatever goals you choose to set, make them achievable but also challenge yourself especially if your ultimate goal is to purchase a house within a specific time period.
Put Yourself on a Budget
Now that you know what some of your goals are, you should definitely put yourself on a budget. While we know that budgets can seem restrictive, we also know that challenging yourself is a sure-fire way of achieving your goals (Take a look at this article to learn how to create your own budget).
First you need to calculate your monthly expenses, these should be the necessities:
- Phone bill
- Car payment/ gas/ transportation
- Debt repayment
- Contributions to long term savings like TFSA and RRSP
Once you know the exact cost of living for one month, subtract that from your total income for the month and you’ll know what you have left over to do with as you please. We wouldn’t suggest putting all of it in your savings but definitely consider putting away the majority of it.
Now Stick to it
Unfortunately now comes the hard part, sticking to your budget and working towards your goals. We won’t lie to you and say it’s easy to stick to a budget, because it’s not. It requires work and dedication, but the good thing is that you have a really great and important goal you’re working towards, a home. Focus on how much you want to own a house and how great it will feel when you finally do.
Apart from sticking to a budget and saving as much as you’re comfortable with, you also need to work at saving intelligently. This means you need to be prepared for the unexpected. Life happens and it could derail your house goals if you aren’t prepared. An emergency fund will help with this. While you’re saving for a down payment, also try to put away a bit each month for any expected issues or emergencies.
Worried that there will never be a right time to invest in a house? Read this.
Look into Increasing Your Monthly Income
If owning a house is extremely important to you then you can also consider increasing the amount of income you bring home each month, this will definitely help you quickly save enough for a down payment. Look for a second job that you can work at on the weekends. Consider selling items you no longer need or use online. Or turn a hobby into a job. Just make sure that you’re actually making a profit or that the time commitment is worth it to you.
Choosing to purchase a house is a serious decision and saving for it will be a challenge. But, when you make a plan and work hard to stick to it, a down payment for your future home can be achievable.