There are many factors that come into play when you’re ready to buy a house. From getting approved for a mortgage and selling your current home, to having an experienced local realtor on your team and having a down payment saved, there are many things you need to check off your list before it’s finally time to buy your dream home. For now, let’s focus on the importance of having a down payment readily available. Having a sizable down payment can greatly help you in the home-buying process, as your mortgage rates may be lowered, and you might even be approved for a larger mortgage.
Before we get ahead of ourselves, you need to save the down payment first. In this article, we’ve covered our eight favourite and most effective tips to help save for a down payment.
1. Plan and Create an In-Depth Budget
A savings plan and budget are absolutely necessary before you can start saving your money effectively. Pick an evening where you can sit down and hash out all of the details. If you’re purchasing with a spouse or partner, it’s integral to have them involved.
Your plan should include:
- Your current monthly budget
- A reasonable new monthly budget
- Your savings goals
- Dates for when you need to save by
- Ways to decrease monthly spending
- Things that can be sold for extra money
As for your budget, it’s important to save as much as you can each month, while still being reasonable. For instance, you can plan to stop eating out as much, but to cut your grocery bill in half might be a little drastic. Take a look at your monthly cell phone bills and give your provider a call to see if they can be reduced. Do you find that you’re not watching TV as much as you used to? Lower your monthly package or switch to just Internet.
There are many ways to lower your monthly budget. While budgeting, be sure to remember the following:
- Mortgage or rent
- Television and Internet
- Car payments
- Maintenance and/or repairs
- Credit cards and/or student loans
You may find it helpful to create a spreadsheet using Google Spreadsheets or Excel to document your monthly bills and see where you can save.
2. More Affordable Transportation
If both you and your spouse have a vehicle, it may be worthwhile to downsize to just one. Two cars mean double the insurance, gas, payments and maintenance. It might just be what’s standing in the way of you and your dream home.
Having one primary vehicle is often necessary for families who have further commutes or small children, not to mention the ease of bringing groceries home or running errands. If you can carpool together for work or one if you has an easier time commuting via public transit or bike, you could save yourself thousands fairly quickly.
3. Pay Off Debt
There are so many benefits to paying off your debt. This includes student loans, credit cards, overdraft, car loans, payday loan, and every other kind of loan you can think of. Not only does having debt mean that some of your monthly income is going toward something other than saving for a down payment, having too much of it can hurt your credit score or prevent you from obtaining a mortgage.
Before you can go full-force into saving mode, take some time to hammer down your debt. Take three to six months where you live on a strict budget and really focus on lowering some of your debt.
4. Tools & Programs
It’s 2018, which means there are tons of tools and programs available at your fingertips that can help you save money. For instance, most banks offer a free automatic transfer service that will put money from your chequing account into your savings account without you even noticing. There’s also plenty of helpful apps that can help you stay on top of your budget and savings goals, even sending you reminders or local savings opportunities. Some of our favourites include Mint and You Need A Budget.
Most municipal or provincial governments have programs in place that can help first-time homebuyers. For instance, the City of Hamilton has the Homeownership Down Payment Assistance Program available to residents who meet certain criteria.
As a first-time homebuyer, you can even use your RRSP as your down payment, free of charge! Speak with your bank or do some research online to see what’s available to you.
5. Be Frugal
It’s time to put your budget and savings plan into action. This is where you buy the apples that are on sale, head to the clearance rack or cut the additional and unnecessary purchases altogether. If buying the generic brand instead of the popular name-brand item will help you save a dollar or two, do it!
This also means limiting your excess spending on entertainment. Going to the movies, concerts, vacations and weekend getaways may have to be limited for the time being. Over the course of a year or two, chances are you’ll see these minor changes add up.
Give your savings account a boost by selling things you already own! Even if it’s $50 here and there, every penny counts. You might be surprised at the household items that can be sold on local listing platforms like Kijiji, Facebook Marketplace, and VarageSale.
Not only will this help boost your savings account, but it will also help you to de-clutter your home and prepare for when moving day finally arrives!
7. Find a Side Hustle
Getting a second job or doing some extra work on the side can really make the difference. Even if it’s a small side job, like pet sitting or gardening, it’s still extra money going toward your down payment.
Alternatively, you could try to find a second job that will help reduce some of your monthly bills. Do you have a gym membership? Most gyms will offer employees a membership free of charge or at a discounted rate.
8. Save Your Extra Money
Extra or “surprise” money might be just what your savings account needs. GST cheques, tax returns, work bonuses, commission, and inheritances can be put to good use, rather than spending them on a night out or unnecessary shopping trip.
Again, it’s all about how you plan to save. Making small changes like the ones listed above might be just what you need to save for your down payment and find your dream home. For more tips and tricks to help you while on the road to buying a house or selling your current home, visit The Woolcott Team blog.