Saving for a downpayment is a significant financial milestone. It may not be an easy feat, but it’s a possibility for everyone, and it’s a major investment that pays off down the road. There are plenty of ways to save for a down payment and become a first-time home-buyer. The challenge is prioritising your spending, getting an idea of what you can afford, and staying focused on your goal: owning a home.
Set a goal and be realistic.
Goals act as excellent motivators, giving something specific for you to work towards and a vision for the future. A goal that is too loft however, can have the opposite effect - so be realistic.
How much home can you really afford? And not just afford, but afford comfortably, because being “house poor” is no fun.
Meet with a lender or a mortgage broker to find out what you’re eligible for. With stricter lending laws and the mortgage stress test, a potential rise in interest rates must be taken into account when determining what you can afford in B.C. This means you now need to have more of a “safety cushion”, it also helps buyers from purchasing more home than they can afford. You likely are closer to getting into the real estate market than you think!
Next, meet with one of our REALTORs, who can advise you and help you navigate the market and get an idea of the types of properties and homes that might fit your budget. A REALTOR is your best resource when buying a home, so be sure to take advantage of our in-depth knowledge and insight. Our agents work hard to negotiate the best price for our clients.
If at this point your home buying goals are starting to feel unrealistic, don’t lose hope. One mistake that many make, especially when buying their first home, is thinking they have to find something perfect. It’s a significant purchase, but rather that searching for your “forever home”, think of it as a step in the right direction.
While a full, detached home with a big yard and complete basement suite may be your ultimate “ideal”, you may also want to consider a townhome or condominium as a first time purchase. Potentially less expensive than a detached single family home, a condo or a townhome may help you to get your foot in the real estate door, and allow you to start building equity which may enable you to upgrade to a bigger home in the future.
If you’re handy, consider looking at homes that could increase in value with a few upgrades or renovations. Another option is to look at up and coming areas, outside of the higher priced markets.
Cut out unnecessary spending
With a better idea of what you’re working towards, you likely feel more motivated to save.
Create a budget, and take a look at where you’re spending your money. Then look for items that you can cut out. You’ll have to make some sacrifices, but that doesn’t mean like has to be a drag. You just need to be creative!
Transportation is a big one. Do you really need a vehicle? Is taking the bus, walking, biking or carpooling an option? In 2016, British Columbians spent on average over $12,000 per household per year on transportation. Shifting some of that towards your down payment savings could make a big difference.
Some other places you may be able to cut back are unnecessary subscriptions and memberships, and dining out, or buying fancy coffees. You might try shopping a second hand shops. Still paying for cable TV? There may be online options that are more affordable. Instead of buying expensive gifts for friends and family, consider giving them something homemade or better yet, your time. The little things do add up!
If you’re really looking to fast track your savings, consider downgrading your current rental situation, whether that means moving to a cheaper rental, or taking on roommates, or even moving in with family if that is an option for you. You wouldn’t be the only one, or the first to take that route.
Use a savings account
A savings account is a great way to stay accountable and keep track of your down payment fund.
Talk to your financial institution about setting up automatic payments to your savings account, so you don’t even have to think about it. Add extra cash when you can. While you’re there, ask them about opening a tax free savings account, or TFSA so that you are not penalised with withdrawals.
You may also want to consider opening a RRSP, if you haven’t already. If you are planning on buying your first home you may be eligible for the Home Buyers’ Plan, which allows you to withdraw up to $35,000 from your RRSPs for your down payment.
Get a side gig
Another way to easily save money? To put it simply, make more of it.
If you have some free time on your hands, why not take on a side hustle? Chech out part time jobs in your area. If you have any special skills, try freelancing or working online. Don’t overwork yourself, but if you are able to make it work, the extra income can make a difference.
If you’re working hard in your current career, there’s also the option to ask for more work, as well as ask for a raise. If you don’t ask, how will you know? If you wishes are granted, funnel all that extra cash into your down payment fund.
Keep your eyes on the prize.
If you ever start to feel defeated, remember your end goal. It’s not a race, and it can take some time, but with the right amount of drive a focus, you can make it happen.
Ready, set, save!
Give us a call, text, or email before you are ready. If you wait until you are ready we may never hear from you!! We’re here to help you through the process and into the door of your first home.