TNG Explains: Saving for a Mortgage down Payment
In this economy, saving for a mortgage down payment can be tough, but small changes can help.
Jan 22, 2024
Saving for a mortgage down payment can seem overwhelming to both new homebuyers and those who have purchased a home before, especially in today’s economy. Sometimes making small changes can help you reach your financial goal.
The amount of your down payment will affect the home you can afford and the type of mortgage you will receive from a lender. Though easier said than done, you’ll be in a much better position if you are able to put more towards your down payment. We recommend talking to a mortgage broker to see how much you will be able to afford.
Depending on your region and the type of property you’re purchasing, you’ll have to put anywhere from 5-20% down. To break it down, if you’re buying a $700,000 property, your down payment will be:
5% = $35,000 down payment
10% = $70,000 down payment
15% = $105,000 down payment
20% = $140,000 down payment
Note: If your down payment is less than 20% you will need to purchase mortgage loan insurance. You can learn more about this with CMHC (Canada Mortgage and Housing Corporation).
Start saving for your down payment:
Open a Tax-Free Savings Account dedicated solely to saving for your down payment and has some tax benefits.
Review your current spending habits and see where you can reduce your spending: Cut down on subscriptions (streaming services, magazines, etc.) Reduce your spending on takeout. Keep your credit card at home and pay with cash instead, when possible.
Make your coffee and meals at home. Take transit instead of costly car services, when possible. Call your internet provider to see if they can offer you a discount.
Embrace staycations, find ways to relax and unwind with the same vacation feeling close to home for a lot less money.
Set weekly or monthly goals and track your success. Automate any savings you can so it is one less stream of savings.
Save any extras, work bonus, pay raises and tax refunds can really add up.
Check to see if you have anything to sell, then you can set the money aside.
If you rent, consider a roommate to cut down on some of the living expenses.
Buying a new home may seem as though it is a long-term goal but if you are focused while setting and tracking your goals, you will be one step closer to owning a home.
This article is for informational purposes only and is not financial or legal advice nor a substitute for legal counsel.