Homeownership is an exciting opportunity that shows independence and personal growth. In Calgary, owning a home comes with its perks and in an economy where home prices are rising every year, there is no time like the present to make your move! However, before you can buy your new home, you need to save a down payment.
With the new changes to Canada’s mortgage rules, saving for your down payment has become more trying. You are now required to save significantly more, and buy less than what you were previously allowed. You can learn more about the new mortgage rules and how they impact buyers and lenders in our previous blog here.
Saving can be a daunting task, but there is no need to be concerned! Follow these tips, and you’ll be prepared to put your down payment towards your new home!
Saving for anything important - whether it is a vacation, car or home - is all about defining your priorities. More often than not, money gets pulled in multiple directions as we spend it unnecessarily on things we don’t always need. However, when we want something bad enough, it becomes easier to save for the big purchase.
If buying a home is your top priority, it will naturally become easier to save for it. It might mean you can’t go on as expensive of a vacation; maybe a staycation is more feasible. Maybe you will need to cut back on the amount of times you dine out, start making food at home, and always make sure to bring your lunch. If you make the purchase of your new home a priority, you will have an easier time seeing the big picture when you save your money and in turn, saving for your home will become easier.
Start your saving with a clean slate
Saving can be tough when you are paying off debts and interest to someone else. Before you start saving for your down payment, it is a great idea to pay off all of your existing debts. Responsibilities such as credit cards or personal loans cost a lot of money over time and significantly limit your saving potential.
Start by sorting out all of your current debts, and begin a process of paying them off. Determine your smallest, highest interest debt and pay it off. Then take whatever you were paying on that debt and add it to what you were paying on the next debt. Continue this process until your debts are as small as possible, or non-existent. Once those debts are paid off, you can take all of those debt payments you were making monthly and put them towards your down payment savings!
This process can take several years. It is always best to not live beyond your means and that can be done by lowering or eliminating your debt to income ratio. By eliminating as much debt as possible, you are able to devote more of your extra money towards your down payment and in turn, you will be able to afford that down payment sooner.
Seeking financial advice
Smart-banking, investing, and savings each have a place in helping you achieve your goal of homeownership. For example in the case of a Registered Retirement Savings Plan (RRSP), most institutions offer first-time home buyer programs in which you can withdraw from your RRSP to make your first purchase easier.
It’s always wise when diving into the world of homeownership to consult your local bank or financial planner for more details and help determining what is right for you.
Rent small, save big
A common challenge with saving for a down payment is the battle between paying for a current home while saving for the next. To save for your down payment efficiently, you may have to make a short-term compromise and rent small in the present to save big for the future.
Minimizing your current living expenses to accelerate your savings is a great way to save for your down payment faster. You may have to sacrifice a little bit of space or luxury for a bit, but it will pay off in the end with your down payment.
Saving for a down payment can be a daunting task. With current financial responsibilities putting stress on every dollar, it can be difficult to put money away in a timely manner to help you save for your new home faster. By following the simple saving tips above, it can be possible to save for your down payment faster and more efficiently so that once you find your next home, you can make the transition sooner.