There’s no better time to buy your first home than when interest rates are low and the market is hot. And even when you don’t have enough money in the bank for a down-payment, there are things you can do to help accelerate the process. To get in your dream home sooner than later, follow these 10 tips to help you save for a down-payment faster.
Automate Monthly Savings
If you’ve been trying to put a little money here and there into your savings account, you’re probably no closer to your goal than when you first started. To really save quickly, you need to automate your payments and lock them into an account that you can’t touch. This will keep you disciplined with your money and help you build it up much faster. Try starting with as little as 10 percent a month of your income, and slowly adjust over time until you start to feel a pinch on your day-to-day expenses. Once you’ve obtained the appropriate level in which you can still live comfortably and barely notice the reduction, set that amount and watch the savings grow.
Become More Frugal
There are also several ways to cut down on your expenses to help you save faster for a mortgage. Examples include that annual trip you take each year down south. Instead, perhaps stay closer to home and go camping, or take advantage of a stay-cation to save big. Alternatively, perhaps you can ride your bike to work instead of driving a few times per week to save on parking and gas costs. You can even try to shop at a different grocery store, get rid of that gym membership you never use, switch phone providers, or avoid buying new clothes this year to save some money that you can add to your savings account.
Utilize Your RRSPs
If you’ve already been saving for your retirement, you can transfer those savings over to help finance your first home. In fact, it’s a program called the Home Buyers Plan. It allows you to take out the money you’ve saved in your RRSP and use it towards your down-payment with zero tax consequences. What’s the catch? You will have a set monthly fee that you will need to pay back. But don’t worry, since you’ll have 15 years to pay it back into your RRSP in full.
One of the fastest ways to boost your income quickly is by taking on some extra shifts at work or getting a second job. It’s not everyone’s favourite way to save, but it’s an extremely effective way to get more money flowing in. If you can afford the time and energy, especially if you don’t have children or pets to attend to, consider your options. And make sure you love what you do, as it will be a less stressful experience while balancing two jobs in that field!
Pay Off Debt
Paying off your debt is imperative. Trying to save while having to dish out money each month towards your debt and interest can make it feel next to impossible to save anything. Start with high-interest payments first, like credit cards. Then, pay off your car loan or any personal loans. Zap accumulating interest first, and then you can start to build up a nest egg.
Prioritize Your Spending
Saving for your down-payment needs to be your top priority. That means other non-essential expenditures like entertainment, dining out, and shopping need to be lower on the list. A romantic dinner at a swanky restaurant or going to see the latest blockbuster at the cinema costs money that could be going toward your down-payment. Just because you’re not spending excessively doesn’t mean you can’t have fun, though. Have a date night at home with homemade pizza and Netflix. Make coffee at home before heading out to work. Batch prep lunches on the weekend so you don’t waste money on buying takeout lunches every day. Don’t deprive yourself, but don’t spend money needlessly, either. Every Frappuccino sets you a few dollars back from reaching your savings goal!
Create a Budget
Creating a budget can be beneficial for saving while helping to stick to the priority list. Once you tally up what you need to save, how much income you earn, and what all of the important necessary expenses are (such as utility bills and rent). After, create a budget to help keep your spending habits on track.
Open a Tax-Free Savings Account
Tax-Free Savings Accounts (TFSAs) are a great vehicle for savings, and some folks even prefer them to RRSPs. Not having to pay tax on the money you earn can be a major benefit when you’re trying to accomplish your down-payment goal. You can even automate payments to pull directly from your chequing account each pay period.
Sell Your Car
If you’re really determined to reach the amount you need, maybe it’s worth looking at your mode of transportation. If you have two cars, or even just one, selling it could be a sacrifice worth taking. Ottawa has a robust public transportation system, plus a large network of bike paths for use in the milder months. Of course, you can even walk to work if you live close enough. You’ll save money, and it’s healthier as one less car on the road is always a good thing!
Talk To a Financial Planner
Having a solid savings plan in place is key. That’s why talking to a professional who understands all the financial instruments that can be utilized to help you save faster, is crucial. They’ll help you set an appropriate budget, give you some handy strategies to save, and set you up an account to save even more quickly.You’ll be surprised at how much money you can save for your down-payment when you are getting your savings into shape. If you would like to learn more and explore all your mortgage options, talk to us at Geoff and Bobbie McGowan. We can help paint a clear picture about your current and future finance needs in order to pursue your home ownership goals.