Tips to Save for Your First Down Payment

When preparing to purchase your first home, saving for a down payment can seem intimidating and, for some, unattainable. It’s a large financial goal, but there are many ways you can prepare to achieve this milestone. Here are a few of them.

Prioritize your wants and needs

The first step is setting and sticking to a realistic budget, which means deciding on expenses which expenses are and are not essential to your lifestyle. That may mean eliminating certain expenses or looking for cheaper alternatives when going out to eat, buying a new pair of shoes, or going on a vacation, for example. The key is consistency over a long period of time. Once you settle on savings that work for you, these seemingly insignificant little adjustments can add up.

Maintain your credit score

A good credit score is essential if you want to qualify for the best possible rate on your mortgage. To build a good credit score, be diligent about paying your bills on time, keeping within your credit limit, and repaying existing loans.

Speak to a financial advisor if you’re having trouble managing your debts and they’ll often have management strategies that will help you not only pay them down quicker but save on interest—savings that you can then invest in your new home.

Consider additional costs and fees

The list price of your home and associated down payment are not the only costs for which you’ll have to save. There are fees, taxes, and warranties that will factor into the cost of your first home as well. You’ll want to speak to a financial or real estate professional to get an estimate of these costs so you can account for them in your saving strategy.

To help offset this, make sure you research the incentives and exemptions for first time homebuyers in your city or province. These often add up to several thousand dollars.

Borrow from your RRSP

As a first-time home buyer, you are able to borrow up to $35,000 tax-free from your Registered Retirement Savings Plan (RRSP) to put towards your down payment. This is a part of the Home Buyers’ Plan and is a great way to meet your down payment goal by using existing savings.

If you are a first-time home buyer, Spectrum Realty can guide you through the process and give you the expertise you need to find the right home. Contact us today.