If you are a first time home buyer in Canada, remember that you will have to provide an upfront payment of 5% to 20% of the purchase price before you buy a house.
If you are looking to secure a conventional mortgage, the requirement is that the down payment be no less than 20% of the purchase price or the appraised value, whichever is less. If this is something you won’t be able to afford, then you can secure a home for as little as 5% of purchase price, but this option is called a high-ratio mortgage and you will also have to buy default insurance and make payments on it as well.
Whatever your choice is from the mortgage options, the fact remains that the amount of down payment determines the course of the rest of your mortgage. The larger your down payment, the more money you will be able to save in the end. It is important to pay as much as you can for a down payment as it will decrease the amount of your monthly principal payable and interest payments. Also, you will pay a relatively smaller amount of interest over the life of your mortgage.
Here are some of our time tested tips to get you saving up for this all-important down payment:
- Why not involve your friends, families, loved ones, even colleagues? Let them know that your goal is to get a house of your own. Then let them know that their gifts in this regard will be welcome. Every birthday, Christmas and any other occasion for gift-giving let them know that what you really really want is cash or cash equivalents to help you save up.
- Congratulations if you are expecting a tax refund this year! Now put it away in your bank account. Your life is getting by without that money just fine, so don’t end up spending it just for a moment’s pleasure. It will feel so much better when you finally have the keys to your own home.
- Your goal should be to pay a big down payment. The only way to ensure this is by saving. The movies, make up, partying and expensive dinner can wait. Direct all your extra money towards your savings account.
- It would be ideal if you can get another job… or two! Hold garage sales, walk dogs, baby sit, do whatever it takes to get extra cash and save it for a new home. You will be glad you did. All this hard work will only make the end result even sweeter.
It may seem impossible to put down a big amount of money aside every month, but remember that owning your own home is a big accomplishment.