When it comes to buying a home, saving up for a down payment can seem like a daunting task. It makes sense to put down as much money as you can on your home, because that translates into lower monthly payments, reduced mortgage insurance costs and more home equity. With many hopeful first time home buyers already financially committed to student loans, car payments and perhaps even the financial demands of starting a family, however, it can be really difficult to find extra money at the end of the month to set aside for your dream of owning a home.
As hard as it can be to save up, studies show that you shouldn’t let worries about a down payment overwhelm you to the point of taking too much time to buy your home. According to the Globe and Mail, 55% of first time homeowners said they would have bought their first place sooner if they had the chance to go back in time. Studies also show that it takes under 2 years to save up a 5% down payment and somewhere between 1-4 years, on average, to save a 10-20% down payment, which means that home ownership can be a realistic goal for you to achieve, no matter where you currently stand financially.
Here are a few tips to help make your dreams a reality as quickly as possible:
- Reduce your expenses. Saving for a home is good incentive to tighten the belt a little bit.
- Look at your options for using your RRSP as a down payment under the Home Buyers’ Plan (HBP)
- Evaluate if you can cut down from 2 cars to 1 car in your household.
- Ask for cash for birthday, holiday or even wedding gifts. Cash gifts from parents are a common way that Canadian first-time home buyers speed up the saving process.
- Wait on your next vacation or plan a stay-cation. If you’re used to going away every year, skipping a year or postponing it by six months will help save you a nice chunk of change.
We have helped countless numbers of first time home buyers get their foot in the door. Even if you’re at the saving stage, it’s a great idea to speak with a mortgage broker to help you plan your savings’ strategies and get a professional opinion on how long it will take you to be ready. Because who knows? You might be more ready to buy your first home than you think!