The first goal on the path to homeownership is saving for your downpayment. Purchasing a home will often be the largest investment people make, and saving for the downpayment could be the toughest goal to reach.
Knowing how and where to save the money needed for a downpayment can allow you to buy your new home quicker. Barb Pinsent from Mortgages by Barb offers these simple ideas:
Keep it in the Bank
Starting a savings account can help keep your money safe while allowing you to earn some extra money through interest. And keeping your savings in another bank separate from your usual spending account can be useful as well. “Making it a little harder to transfer money from your savings account to your spending account can stop you from impulse buying,” suggests Barb, “especially when you have a large amount saved”.
It will also be useful when it’s time to use your down payment since the money can be easily certified by your bank. In Canada, brokers and mortgage lenders are required by law – through the government agency called FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) – to obtain your ID and occupation details to ensure the property is being purchased without suspicious activities. The paper trail associated with having the money in a savings account will save you from going through any unnecessary red tape.
Automate your Savings
You can also set up your savings account to have automatic payments come out from your paycheque. The key is to lock down this account and let it build up over time. This will help you save and accumulate money much faster, while teaching you discipline with your savings. Try starting with 10% of your income and adjust over time. You will barely notice the deduction and will be surprised at how quickly the money will grow.
Use your RRSPs
Last month the Federal Government announced some changes to Home Buyer’s plan that makes getting into your first home easier for many Canadians. The Home Buyer’s plan allows first-time home buyers to take money out of your RRSP’s and use it towards your down payment with zero tax penalties. You just need to ensure you pay the money back into your RRSP within 15 years. The recent changes has increased the amount available for withdrawal to $35,000 per person. Combine that with a partner and you have $70,000 towards your downpayment.
Skip Expensive Purchases
As the weather warms up, you may be dreaming of working on your tan. “That one week all-inclusive trip to Cancun can cost you and your family thousands of dollars that could have been used for that initial down payment” says Barb. “Try using cost-effective outings instead.” Some of Barb’s inexpensive suggestions are a stay-cation, camping trip or a visit to a friend’s cottage. Focus on needs over wants. If something doesn’t need to be purchased, try to avoid it. You will be surprised how much money you can save. You can also save faster if you shed any items with hefty monthly bills that you are barely using, such as a second car or cable bill.
Save the Extras
Tax refunds, raises, bonuses – all the extra incomes should go straight into your savings account towards a home. These can give your reserve a quick boost, pushing you towards your goal much sooner.
Don’t fool yourself into thinking you need to wait years to purchase a home. Just get your savings in gear, keep it up and be committed. By performing some of these simple steps, you can be in your dream home faster than you think. To learn more savings tips or to discuss strategies to get you into your new home faster, contact Barb at Mortgages by Barb on 780-370-1490.