Buying your first home is a key milestone often signifying a new chapter in your life.
It can be both exciting and nerve-wracking. One of the biggest stressors is figuring out how you’ll come up with thousands of dollars for a down payment.
So, before you fall in love with the perfect home or resign yourself into thinking it’s something you can’t afford, consider these saving ideas.
Check out options for first-time home buyers.
If you’ve been contributing to your Registered Retirement Savings Plan (RRSP), as a first time homebuyer, you may already have funds to use towards your down payment.
The
Home Buyers’ Plan (HBP) enables eligible buyers to withdraw up to $35,000 (per borrower) from their RRSP without being taxed.
These funds can be used towards a down payment or to cover home buying expenses including moving costs.
Saven Tip: Remember you will need plan for repayment. Be sure to include the HBP re-payment amount into your monthly budget.
Even if you have the minimum down payment saved, using the HBP can enable you to make an even larger down payment, which can reduce the amount
of
Mortgage Loan Insurance and Premiums you’ll need to pay. Plus the lower your mortgage balance, the lower your mortgage payment, and by keeping
your mortgage payment down you’re more likely to have money left over for savings.
Is the Home Buyers’ Plan right for you? ? It is a helpful tool, but it’s important first time home buyers understand all the implications,
do their own research and think about consulting with a financial advisor to consider:
- Is it the right time to cash out your RRSP?
- What are the possible implications of forgoing future tax sheltered growth in favour of reducing the
mortgage amount (along with the accompanying default insurance premiums and interest costs)?
Create a saving strategy
Monthly home ownership costs including things like mortgage payments and property taxes are generally higher than the cost of renting.
So why not start saving the difference right away? For example, if you currently spend $1,500 a month renting and you’re expecting
your monthly housing costs to be around $2,000 each month, it’s a good idea to set up automatic deposits to save the $500 difference.
Not only will this help you get used to the new monthly payment amount, it will help you save money to cover some of your upcoming
expenses like moving costs and legal fees.
Saven Tip: Set it and forget it - think about setting up automatic payments into a
High Interest Savings Account
and align it to your pay period for easier budgeting.
Have you considered reviewing your monthly household budget? For many savers, reducing monthly
expenses is a great way to increase savings. Whatever you manage to save should be added to the automatic payment amount into your
High Interest Savings Account – every little bit helps!
Buying your first home is exciting. Just be sure to do your due diligence and review all your options when it comes to
saving for a down payment. By putting a plan in place that reflects your needs while considering all of the solutions and
strategies available, you’ll be on your way to realizing your dream.
At Saven Financial, we’re passionate about helping people save and achieve their financial goals.