Rising home prices may make the thought of saving for a down payment seem intimidating. It doesn’t have to be. With a plan in place and the diligence to follow through, you can reach your goal of a down payment sooner than you may think.
1 – Commit to Saving
The first step is always the most difficult, but also the most important. You must prioritize saving for a down payment. This means you may need to make some changes to your everyday life. Pick up take-out for dinner once a week instead of three times. Only watching re-runs on Netflix? Maybe it’s time to cancel that subscription and “borrow” your parent’s login instead. Regardless of where you can cut back, committing that money to saving rather than spending is the first step towards achieving your mortgage goal!
2 – Pay Off Any Debts
Saving money for yourself is difficult if you owe money to someone else. Debt is a totally understandable part of life. Whether it’s repaying student loans or catching up on credit card bills, establishing a plan to settle these debts gives you the freedom to start saving for the future. Also, it can be very difficult to even qualify for a mortgage if you have too much consumer debt, which makes this step that much more important. For more tips on paying off debt and improving your credit score, check out our blog post: Improving Your Credit Score
3 – Re-Evaluate Your Expenses
Once you’ve committed to saving and paid off any debts, you can start looking for extra cash to contribute each month. Every expense that you cut or change means more money that can be put away. If you’re still planning on working from home, at least part time, post-pandemic, maybe you and your partner can sell one of your vehicles. Not only would you save on payments, but also insurance, gas and maintenance. ALL of this money can be put right into savings without having to make any other sacrifices to your lifestyle.
4 – Budget Your Paychecks
This step fits into the commitment to saving, but we’ve isolated it because it is super important all on its own. If you understand your monthly expenses, you can budget your paychecks accordingly. Commit to saving a set dollar amount each month. That way, when you receive a gift, or a holiday bonus, you can still treat yourself to an impromptu night out or weekend getaway without sacrificing the savings plan. But a set savings plan only works if you have a stable income and clear month to month expenses.
5 – Establish (or contribute to) a TFSA
If you don’t yet have a TFSA, this would be the perfect time to set one up. Tax Free Savings Accounts exist to provide an incentive for Canadians to save money. As the name suggests, you won’t be taxed on gains in your TFSA, however, there are contribution limits. Consult your financial advisor or planner for more details.
BONUS TIP – Let Us Help You Save Money On Your Mortgage
Success! You’ve saved enough for a down payment and are ready to find your first property! Let us pre-approve you for a mortgage and ensure you save on your mortgage payments down the road.