5 Ways To Save For A Down Payment on a Home By Team Thayer
How to Save For A Down Payment
There are many great reasons for you to start saving for a down payment. Fixed mortgage payments and a more stable market are just some of the reasons to consider buying a home. Whether you are planning to buy a home in the near future or not, coming up with a down payment can be challenging. It all depends on how motivated you are to accomplish your financial goals. Here are a few tips on how to save for a down payment.
Reduce large expenses: Skipping your Monday morning Starbucks latte may help you save money slowly over time, but why not go after your biggest expenses first for better results. We are talking about your rent, which is probably eating up 30% of your salary pay. You can always try to negotiate a better rate with your landlord, move to a cheaper location, or even downsize by moving to a one bedroom apartment which will drop your expenses greatly. You can also consider bringing in a roommate to help cut down costs and help you save more money each month.
Automate your savings: This seems obvious, but you would be surprised how many people do not consider having some contributions automated to their savings. Tell your payroll department that you want a fixed amount automatically deducted from your paycheck and deposited into a designed savings account. Start small so that it does not seem like a major change in your life. Over time, payoff for your contributions can be significant.
Get rid of one car: If you have a partner and you have two cars, consider getting rid of one of them. This can save you thousands of dollars each year. You can also consider taking public transportation, carpooling or cycling to work. If you can make this work, you can essentially save one car payment each month, plus gas, maintenance and insurance. This adds up quickly and turns into big savings over time.
Save your tax refunds: The average tax refund in 2013 was $1600. While it may be tempting to spend all your tax refunds, why not show some restraint and put your money into a designated down payment account, your older self will thank you for it!
Saving in an RRSP: Under the federal government’s Home Buyer’s Plan, you can use a RRSP to save for the down payment on your first home. Your contributions are tax deductible. And you can borrow up to $25000 from the RRSP for your down payment when you are ready to buy. You won’t pay any tax on the money as long as you pay it back over the next 15 years.