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6 quick tips to save for your down payment

There are many reasons to consider when thinking of purchasing a home. Maybe it’s just time to have a place of your own after renting for more than a decade. Perhaps you would like to have a yard to relax in, or for your young family to enjoy. Whatever the reason, deciding to become a home owner is an exciting step for anyone. It’s always good to have a plan in place, and when it comes to considering a mortgage, coming up with a plan for a down payment is the best place to start.

Here are some quick tips to help you get going on saving for your first down payment:

  1. Open a new savings account – Set up an automatic transfer so that money goes directly into your new mortgage savings account each paycheque. Soon this will become the norm, and chances are, you won’t even miss the money .
  2. Create a budget – Knowing what’s coming and going out each month is a major key to starting on the path to reaching your goals. You will see where you can be more efficient and places you can save even more.
  3. Put any extra income to your down payment – It might be tempting to spend a bonus from work on a quick holiday but even a small bump can help you get to your goal quicker.
  4. Look for cheaper ways to do things – Go to the library instead of purchasing books, stop eating out as often, take your vacations closer to home. These are all small things that can add up in a big way.
  5. Take advantage of RRSPs – The Home Buyers' Plan is a program through the federal government where you can withdraw your registered savings (RRSPs) without a tax penalty. To qualify for this program, you must meet qualifying criteria. For more details, visit the Canada Revenue Agency website.
  6. Pay off your high-interest debts – Work on debts like credit cards first. The faster they are paid off, the quicker you can start reaching your savings goal.

We can set you up with a personal savings account that will allow you to earn competitive interest daily and have free and unlimited deposits. If you have questions, please contact us. We're here to help. 

Take advantage of the Home Buyer's Plan

Your RRSP can also help to buy a home. Almost half of the first-time buyers polled in a recent national survey used the RRSP Home Buyers' Plan (HBP). Here's the basics:

    • How much you can withdraw. A qualifying home buyer can withdraw, tax-free, up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance your down payment on a home.
    • Who can use it. You qualify only if you have not owned a home in the past five years (this stipulation is waived if the money is used to buy a more suitable home for someone with a disability). The home must be intended for use as your principal residence.
    • Repayment. Repayments must be made annually over 15 years, beginning in the second year after the year of withdrawal. Missed repayments are taxed as income.
    • No quick withdrawals. You can access money only if it has been in the RRSP for at least 90 days. In other words, you can't make a contribution, claim the tax deduction, and then immediately make a withdrawal under the HBP.
    • The unseen cost. While withdrawals are tax- and interest-free, it's not free money. The cost is the RRSP growth sacrificed until the withdrawal is repaid. And because of the HBP repayments (which aren't tax-deductible), you may find it difficult to make your full yearly tax-deductible contribution.

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Up Next: Are you a property virgin or a next-time home buyer?

Whether you are just starting out in the wonderful world of home buying as a first-time home buyer or whether you a next-time home buyer, you need to factor in some costs and considerations.
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