Most of us follow a transition into “adulthood” through a series of markers – going to university, getting a job, renting your first home, getting married, buying your first home, and having kids. For the most part, there are ages at which these markers must be completed, which can seem stressful to a lot of young adults. When a person takes too long to achieve one of these markers, we mark them as “not grown up enough”. With home prices on the rise and homeowners having to save even more to meet the minimum down payment of 5%, it is understandable that you may be stressed. While you may find it daunting to save up thousands of dollars to meet the minimum requirements, there are a few ways to make it easier!
One of the biggest and easiest ways to save up money for a down payment is to cut back on unnecessary expenses. Do you go to Starbucks all the time for your morning cup of coffee and a quick breakfast on the go? How much do you spend there? By preparing your breakfast the night before and swapping a sugar filled latte with a homemade one, you can save a significant amount of money each month. These savings can then go towards a down payment. All those lattes add up! Prioritizing your expenses and maybe not living as much of a lavish lifestyle will help you cut back on unnecessary purchases and help you put more money into your savings. An easy way to identify areas that you can cut back in is by creating a budget!
Maybe when you created a budget, you realized that that extra car you have is breaking the bank. Getting rid of that extra car can save you thousands of dollars per year. If you live in an area that has transit, or is a close walk to all your amenities, this can be an easy way to save money towards a down payment. No, taking the bus or walking may not be super lavish, but it will help you save money fast! You will save on a car payment every month, plus maintenance, plus insurance, and plus gas! That can add up to around $9,000 worth of savings for the average person annually.
Credit Card Debt
Before you can save money, you should pay off all your current debts. A good rule of thumb is to start with the smallest high interest debt that you have and pay that off. Then once you pay off that one, you work on the next small debt that has a high interest and slowly work your way down. Each debt that you pay off, take the minimum payment that you were paying and use it toward the next one. Make sense? This will create a sort of snowball effect that will help you pay your debts faster and free you up to make larger and larger payments against one debt at a time! Before you can apply for a house, you usually have to pay down your credit card debts.
Borrow From RRSP
If you’re a first-time homebuyer, you can now withdraw up to $35,000 from your RRSP to help buy your first home. You may already have some RRSPs, if so, this is a great way to save some money for a down payment. If you don’t already have an RRSP, this is a great way to save some money for your RRSP and receive a tax credit! First-time home buyers that borrow against their RRSP for a down payment must pay the money back to their RRSP within 15 years. If the money isn’t repaid to their RRSP, it is treated as income and you will have to pay a tax on the money you withdrew as if it were income.
While meeting those markers to progress through adulthood can seem daunting and unachievable, our mortgage brokers at Clinton Wilkins Mortgage Team can help take the stress out of buying a home. Give us a call or get in touch with us here to set up an appointment!