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Tips for Saving for a Down Payment

For first-time home buyers, saving for a down payment can be the biggest hurdle to overcome, especially when it comes to purchasing a brand new development. New condominiums, for example, often require a 20% down payment—although many of these also include appliances, a welcome tax break, and condo fees for an entire year.

Realistically, you will need to save at least 5% of your purchase price. Luckily nowadays, banks are offering fixed interest rates for five years, and they are the lowest they’ve ever been, so it’s a great time to make a purchase.

Here are some of our tips to help you save for a down payment:

 Set up an automatic savings plan and stick with it: After all of your monthly payments, how much do you have leftover? Take the time to calculate your expenses, including your grocery and “play money,” and set the rest aside into a separate account after each paycheque. You’d be surprised at how quickly your bank account will increase.

 Pay off your debts: It makes it a lot more challenging to save money when you’re paying interest elsewhere. Additionally, a high debt ratio will prevent you from qualifying for a mortgage. Clear your outstanding payments and credit card debts. Begin with the debt with the highest interest and work your way down.

 Use a Tax Free Savings Account: When you establish your automatic savings plan, set it up in a Tax Free Savings Account. Your money can grow without penalty, so you don’t have to worry about paying income taxes on such a large lump sum.

Take advantage of the RRSP Home Buyers' Plan: If you’re a first-time buyer, consider using your Registered Retirement Savings Plan to help with your down payment. The RRSP Home Buyers’ Plan lets you withdraw up to $25,000 (each, if you’re a couple). However, it’s important you keep in mind that the withdrawn amount must be repaid within 15 years.

Let us help you reach your goal! Contact our expert mortgage broker Rose Blankenagel at Mortgage West—The Mortgage Centre today.