Saving up for your first home can seem as daunting as climbing Mount Everest to many young professionals. While the amount needed might appear intimidating at first glance, we assure you that it’s more than doable if you save slowly but surely and treat it as an eventual goal instead of something that has to happen overnight. Read on for some of our top tips on how you can manage to save up for your first down payment.
Pay Off Your Credit Card Debts
It would be difficult to save up money if you’re busy paying interest to your creditors. Before saving up for a down payment, we recommend paying off all of your credit card debt first. Start with the smallest high-interest debt, and then continue from there. As you tick debts off your list, you can use the minimum payment you were previously paying towards them to pay off your larger debts – which will quickly snowball into larger payments and help you clear your debt as quickly as possible.
Cut Back On Unnecessary Spending
While it might not seem like it, $25 for lunch here and $50 for dinner there quickly adds up. Before you know it, you could be spending several hundred dollars a month on unnecessary expenses. Track what you spend for a month and see which areas you could cut back in, then take that money and put it towards your down payment.
Borrow From RRSPs
Did you know that in Canada, you can withdraw up to $25,000 from your RRSP (Registered Retirement Savings Plan) to buy your first home? This can be a surprisingly effective way to come up with a down payment for those who can make use of this option. The only catch is that you have to pay the money back to your RRSP within fifteen years. If you don’t, the money will be treated as income and you will be required to pay tax on it.
Move To A More Modest Rental
If you’re saving up for your first home, you might want to reconsider spending a hefty part of your monthly income on that new condo rental. Scale back for a year or two and opt for a more modest rental, or get a roommate to save on accommodation costs.\
Set Up Automatic Transfers
Consider setting up automatic transfers from your chequing to your savings account each month so that your targeted monthly down payment amount is automatically deposited into your savings account – without you having to give a second thought to it. Before long, you’ll get so used to the amount being transferred that you won’t even notice it’s left your chequing account.
Wondering how much you’ll need to save up for that home you’ve had your eye on? Give one of our realtors a call today at 613-733-9100.