Saving up for your down payment – 20 smart strategies
Saving tens of thousands of dollars for a down payment is a pretty daunting prospect. But it is possible with a solid plan – and some willpower. Here are 20 strategies to help you get that cash saved up so you can finally buy something.
1. Set specific goals
Decide exactly how much you need to save, and make a clear plan. Whether it’s $10 a day or $250 a paycheque or $3000 a month.
2. Make your savings 100% off limits.
Stick to your plan…no dipping in for a weekend getaway or a “gotta have it” splurge.
3. Pay off your high-interest debt. If you’re paying 28% interest on your credit card while trying to save money elsewhere, you’re really just shooting yourself in the foot. Lose the debt, then start on your down payment.
4. Automate your savings. “Set it and forget it” is a great way to force yourself to save. Set up an automatic transfer from your chequing to your savings with every paycheque – you don’t even have to think about it.
5. Get a little help from your bank. Some lenders will round each debit purchase up to the nearest dollar. If you’re buying a latte for $5.15, that extra $.85 automatically gets shunted into your savings account. Think about how many times you tap that card every day – and how fast those small, virtually unnoticeable amounts will add up! Ask your bank or credit union if they offer this simple service.
6. Do a slash and burn on the budget. Go into austerity mode so you can save faster, and drop any expense that isn’t vital. Renegotiate your cell phone bill. Look for cheaper ways to do things you love: instead of buying books, go to the library (totally free!). See where you’re doing most of your discretionary spending (Dinners out? New clothes? That three-latte-a-day habit?) and cut back wherever you can.
7. Borrow from your RRSP.
As part of the First-Time Homebuyers Plan, you can borrow up to $35,000 per person from your RRSP to buy your first home, then you’ve got 15 years to pay it back without any tax penalties.
Read more: Tax-free savings tools to help you buy your first home
8. Open up a tax-free First Home Savings Account (FHSA). It’s a brand-new savings vehicle that lets you save up to $40K per person towards your first home purchase. You can put up to $8K a year in there.
9. Cash in some investments.
It might be a little scary to dive into your retirement savings, but look at it this way: buying property is an investment too. And it’s one that’s likely to appreciate even faster than your ETFs, mutual funds, and GICs.
10. Stow your savings in a TFSA.
Any interest you earn in a TFSA is tax-free, so it’s the perfect place to stash a large amount of cash you don’t want to tie up in a long-term investment.
11. Learn to love staycations.
Swap that jaunt south for a quiet week at home, or hit up a friend for some (free) time at her family’s Muskoka palace. Staying close to home can save you thousands. And remember, it’s not forever.
12. Find a cheaper place to live.
We realize that’s a tall order with rent prices as bananas as they are right now. But you can get creative – move to a cheaper neighbourhood, get a smaller place, bring in a roommate for the extra bedroom, split a place with some like-minded friends, or if you’re up for a little family closeness, hit up your parents for a place to stay. Free is always a good price.
13. Talk to the Bank of Mom and Dad (or Grandma and Grandpa).
If they have some good equity to tap into, they may be willing to contribute to your down payment. This isn’t the solution for everybody, but it’s a pretty common choice: over 40% of new home buyers under the age of 34 got help from their parents. A “gift” of money from a family member is tax-free for you – but it has to come from an immediate family member with no strings attached.
14. Put your retirement savings on hold.
Redirect those funds toward your down payment. Then, as soon as you’ve moved into your new place, you can get back to earmarking money for your golden years. And don’t worry, you won’t be shortchanging your future: your new home is an investment that will appreciate over time, and ultimately contribute to your retirement.
15. Get a side gig.
Whether it’s part-time hours at the neighbourhood grocery store, virtual tutoring, or launching an Etsy shop, a side hustle is a great way of turning your extra time into extra cash.
16. Sell your stuff.
For collectibles, clothes you don’t wear, or unwanted IKEA furniture (seriously, people love buying used IKEA stuff!) Kijiji, Facebook Marketplace and neighbourhood buy-and-sells are good spots to unload your stuff. Not only will you earn some cash, you’ll also be decluttering to prep for your move to that amazing new home!
17. Sock away every bonus, tax return and windfall.
Don’t look at it as “free money” to spend on frivolous stuff. Consider it something that will get you into your condo faster.
18. Got two cars? Drop down to one.
And while you’re at it, sell the expensive gas guzzler and pick up something cheap and cheerful that’s good on gas and costs less to insure. Living in the city? If you’re okay with taking transit, you could probably get away with no car, and just use a Zipcar-type service or rent a vehicle when you really need one.
19. Use the 24-hour rule for purchases.
If you want to buy something, make yourself wait for 24 hours. If it’s still a must-have, then go for it. But you might be surprised how often you say “actually, I don’t need that after all.”
20. Talk to a financial advisor.
Chatting with someone with great money know-how can probably help you figure out more strategies to get to home ownership faster.
Need more info on buying your first home?
Check out our first-time buyers hub for guidance on everything from pre-approval to final closing. There’s a ton of info there to help you get started on your search. Sign up today to get full access to all of condos.ca’s great search, research, and comparison features.