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How to Save for a Down Payment
Buying your first house can be a daunting task. It may even seem unachievable the way that the prices have been skyrocketing over the past year. If your purchase price is less then $500,000, you will need at least 5% of the total price of the house you want to purchase for your down payment. It is even better if you are able to save for 20% instead as in this case you will not need to also purchase mortgage default insurance. Mortgage insurance protects your lender in case you default on your loan. If 20% seems way out of reach, not to worry, you can still put 5% down on a house less than $500,000 and still most likely pay less per month in your mortgage than you would be renting depending on your purchase price.
You Have Options
If you are looking to purchase your first home, there are lots of options open for you. You can purchase a condominium for a cheaper price, or a townhome, or you could buy outside of the city in a place like Rockland, Osgoode, Kemptville, Carleton Place, Almonte or Arnprior. Speak with a mortgage broker to get a bit of a feel for where you are at financially, and then you can set a realistic budget goal for your ideal home. We have a great mortgage broker we can refer you to if you don’t have someone in mind. Once you have determined your price range, you can start saving up!
If you are ready for tips on how to save for a down payment, read on!
Set a Financial Goal
It is a good idea to start out by speaking to a mortgage broker to better understand how much you can afford in monthly mortgage payments and for a down payment. Once you have figured out what your budget is for a house, it is a good idea to set a date you would like to have your down payment available. Put this date in your calendar so you don’t forget! Setting a deadline will help to keep you accountable and know that you are working towards something exciting. This makes it easier to say no to a vacation with friends or an expensive new toy. In no way does this mean you can’t have any fun, just be sure to set a realistic expectation of when you will have the funds saved up. That way you can still enjoy life while saving at the same time!
Start Saving
Saving money doesn’t need to be difficult. There are lots of easy ways you can start saving today! A few great ideas include: cancelling your gym membership and working out at home, eating out less, buying generic brands instead of name brands, cancelling your TV subscriptions (you don’t necessarily need Netflix, Crave AND Prime do you?), or make your coffee at home. On top of these ideas, you can also check out how much you are spending on insurance. Sometimes people may be overpaying when it comes to insurance, why not try and shop around a bit and see if you can find a cheaper premium. Insurance brokers can help with this. Let us know if you need an insurance broker as we have a trusted person we can refer you to. Challenge yourself to a “No Buy July” or January… or whenever! This means you will go through 1 month without purchasing anything nonessential. You’ll be surprised when you start noticing what you normally purchase that you don’t need!
Set up Automatic Withdrawls
If you already have a savings account set up, it is a great idea to set up automatic withdrawals that are pulled into your account after every paycheque. If you don’t have a savings account set up yet, be sure to find one that doesn’t charge large monthly fees. Tangerine banking is a great option that offers no-fee accounts. Once your auto withdrawals are set up, you won’t even have to think about putting money away. It will be saved away easily and you won’t even notice. Just remember not to dip into the savings account unless it is an emergency. It is also a good idea to have an extra account set up as an “Emergency Fund”. You want to make sure that these funds are tucked away in an account you aren’t going to touch so it is there when you need it most.
Pay off or Consolidate Your Debt
If you are completely debt-free, you can skip this part. If not, you will want to start paying off your debts sooner than later. A great rule of thumb is to start with your lowest debt and pay it off first. Once that has been paid off, tackle your next largest debt until they are all gone. If this isn’t possible, try to consolidate your debts. Have a credit card with a large amount of debt and high-interest fees? Talk with your bank about switching to a card with lower fees and swap the debt over to that card. Or you could take out a low-interest loan or line of credit to pay off your debt and then repay it as a whole. If you have a friend or family member willing to help pay off your debts and charge a low-interest rate, this is a possibility as well.
Get a Second Job or a Side Hustle
We are in an age where a “side hustle” is quite attainable! Whether you want to drive for a delivery service such as Uber, DoorDash or Lyft, walk dogs, babysit or become a nanny, clean houses, become a mystery shopper, start a blog website, create YouTube tutorials, sell services on Upwork, design logos on 99Designs, sell products on Etsy, become a local tour guide, or a virtual assistant! Perhaps you have a hidden talent. Why not put it to use! You could help a small business out with their social media, sell your services on Fiverr, give music lessons, become a personal trainer, do photography sessions, write resumes, there are so many options out there for you! If none of these appeal to you, why not get a job as a server or a host or hostess! Tips are great and will definitely help when saving your money!
Sell Some of Your Stuff
Do you have some items around the house that you aren’t using? Why not make some extra money off of them! With Kijiji and the Facebook Marketplace, you can safely sell your items easily from your home. Some great ideas on things to sell include instruments that aren’t being used, jewellery, recyclable materials, electronics, art, photos, handmade crafts, beauty products, furniture, rugs, blankets, puzzles, toys, nail polish, clothing, unused gift cards, textbooks, video games, baked goods, Christmas decorations, other home decor, shoes, wedding dress, sporting equipment, and so much more! Just be sure that you don’t sell anything that you are going to need to rebuy down the road or something that makes you happy.
Consider Living with Family
If you have a parent or a friend who you can move in with for the time being to save a little money on rent, this is a great idea. Just be sure not to overstay your welcome! You don’t want to burden your loved ones. If it is possible, you will be able to save money a lot quicker than you would paying rent from a traditional landlord. Another great idea would be to purchase a home with your parents or family member or someone you trust. Multi-generational households are becoming more and more popular because of the financial aspect. Splitting the down payment and mortgage costs between more people means lower monthly costs for everyone. If purchasing a home by yourself doesn’t seem attainable, this might be a good option for you to consider.
Live Within Your Means
Buying a house will most likely be the largest purchase of your life, and it is a huge deal! So be sure to take it seriously and live within your means. A mortgage is a substantial amount of debt owed to a bank and you are going to have to pay large sums every month. Don’t forget about appliances breaking down, roofs needing to be replaced, home decor and so much more. It doesn’t stop with the down payment, there will be lots of other expenses and you want to make sure that you have enough money to float you through not only your monthly mortgage payments but also utilities and other homeownership costs. Not to mention the fact that you still want to have a life! Just be smart with your money. Talking your finances through with a financial planner or mortgage broker is sure to help!
We hope you have enjoyed these 7 ways to save for a down payment. You have to start somewhere, and if you have read this blog, you have begun your journey of saving for your down payment! Once you have your down payment saved up and are ready to begin the process of looking for a home, give us a call! We would love to give you a tour of your dream home. The Susan & Moe Team will help you find a home within your budget. Give us a call!
613-608-4663
Already spoke to a mortgage broker and have your down payment ready to go? Check out these great tips on how to effectively look for a home!
