How to Save for Your Dream Home
According to the Canadian Real Estate Association, home sales in December were up 22.7% compared to December of 2018. Plus, the average price for a home in Canada increased by 9.6% over the previous year, with even more substantial increases in popular metropolitan areas like Vancouver and Toronto. With home prices on the rise, saving for a down payment is more important than ever. Here are some great ways to get you started toward saving for your dream home.
Create a budget and cut out unnecessary expenses. If you usually buy a $6 latte, start brewing your own coffee at home. Consider carpooling or public transit to save on transportation costs. Every little bit you save brings you closer to a new home.
Other smart ways to save money include:
- Rent books from the library instead of buying new books
- Cook at home instead of eating out
- Sell your unused or lightly used clothing and furniture
- Cut out unnecessary expenses like cable or streaming services
- Take public transportation instead of ride-sharing services
- Turn down expensive nights out or vacations
These tasks might be difficult at first but saving will be worth it in the long run. Commit to putting a portion of your earnings in a savings account each month.
Pay Off Your Debts
Buying a home and taking out a mortgage is a serious financial decision. Before taking on more debt, start by paying off the money you already owe if you can. While you don't need to pay off all your debts before making a down payment, consider paying down high credit card balances or personal loans before shopping around for that best mortgage rate.
Earn Money on the Side
If you're committed to buying a new home, consider getting a part-time job or freelancing in your spare time. Your additional earnings can add up fast towards a down payment.
Borrow Money From Your RRSP
Canadians can borrow up to $25,000 from their Registered Retirement Savings Plans (RRSPs) to buy their first home. However, you'll have to pay the money back to your RRSP within 15 years of the withdrawal rate. Otherwise, you'll need to pay income tax on the amount you withdrew.
Take Advantage of a First-Time Homebuyers Program
Receive part of your down payment for your first home as an interest-free loan from the government via the First-Time Homebuyers Program. To take advantage of the program, you must meet certain requirements such as:
- You've never purchased a home before
- Your total annual income does not exceed $120,000
- You are not borrowing more than four times your income
- You are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
- You meet minimum down payment requirements with traditional funds, such as savings or RRSPs.
By prioritizing your savings goals and some of these actions in place, you'll be in a new home before you know it.