Trying to save for a down payment can be challenging as life can often get in the way.
The down payment can be a huge challenge for some considering it’s the biggest upfront cost to purchase a home. Here are 5 tips to get you started, and you may want to also speak to a Certified Financial Planner, as they have other tools to help you further.
1. It takes time to save money, let alone save enough for a down payment. As soon as the idea of homeownership crosses your mind, open a savings account, and start saving some money. I suggest creating a budget and earmarking money from each pay cheque towards a down payment. Auto deposit is a handy feature, and it will automatically move an amount of money into your savings account.
Since down payments are often thousands of dollars, it can take time for the average person to save enough. It takes discipline and time, and you need to avoid the temptation of dipping into it and spending it as it grows.
2. Try and pay off your debts and avoid taking on new debts if you can. This sounds easier than it is, but having a budget, will help keep you on track. The advantage of paying off debts while saving money is that, as your savings account grows in size, your debts that you are paying interest are getting smaller and saving you money on interest charges. Having fewer debts or no debts, will help you when applying for a mortgage, as they can reduce the amount of money you qualify for.
3. Minimize big purchases. Before moving forward with a large purchase such as a new vehicle, think long and hard as you may regret it afterwards if your goal is owning a home. The more you can focus on your down payment, the quicker you will achieve it.
4. Consider any other sources of income besides your regular salary, such as bonuses, commissions, a side hustle or a part time job. Plan to set aside these funds to your savings plan as it will further accelerate it.
5. Not everyone’s families have the means to provide down payment funds. It can be a lot to ask and has the potential to put others in a difficult position for various reasons. But if it’s feasible, a family member could provide you with a financial gift to be used towards your down payment. They may consider refinancing their home to help with the down payment; or maybe an early inheritance could be an option.
Saving for a down payment can be a lengthy process for almost everyone, but it’s obviously an important one! If you can make consistent contributions, follow your budget, limit your spending, and avoid debt, you will be on the right path towards buying your first home.
If you have any questions about mortgage financing or down payments, feel free to connect.