7 Tips To Help You Save For A Home Down Payment Faster
If you’ve decided you’re ready for home ownership, congratulations!
Buying a house for the first time is an exciting task but can also be very daunting. Home ownership is one of the largest financial undertakings most people will engage in throughout their lifetimes. It involves not only a significant down payment, but also a high number of continuous costs beyond one’s mortgage like insurance, property taxes, indoor and outdoor maintenance and furnishing among others. Houses, particularly older homes, are also likely to require expensive, large-scale repairs on occasion and may even need major emergency repairs at some point.
These points aren’t meant to dissuade those interested in becoming homeowners, but instead to remind you of one inconvenient truth: houses require a lot of money to purchase and maintain, and almost certainly more than you think you need. That being the case, it’s time to start growing your savings! Prioritizing saving and reducing your spending is essential to your success if you want to buy a home. If you’re ready to start putting together your down payment, we’ve got a few tips:
1. Keep your emergency fund well-maintained
We stress the importance of emergency funds constantly, but it’s because of the incredible impact they can have when they’re finally needed if they’re well-tended. There are a million life events, like car repairs and emergency vet visits, that need a quick infusion of cash to resolve. If you have to keep pulling from your down payment to cover these types of costs, you aren’t likely to get far any time soon.
Instead, be sure to keep a dedicated emergency fund tended throughout the year. When you have to deplete it, focus on rebuilding it again before indulging on non-essentials or putting more than usual towards your house. It may seem counterintuitive to divert extra money away from your down payment if you have it on hand, but this strategy will help keep you stable when life happens and allow you to focus on saving for your house again faster than if you get seriously financially derailed by an emergency.
2. Keep your down payment separate
Keeping your down payment in one dedicated location is important. Mixing your down payment in with your other savings means it’ll be too easy for you to pull from it accidentally as you cover other costs.
Find a place to keep your down payment distinct from your savings for other goals to give it the priority it deserves. Ideally, this will be an account that’ll allow you to earn interest as you save to help boost your fund. Even once you’ve made your down payment, you can keep this separate fund going as a place to save specifically for continuous home-related costs like maintenance and repairs.
3. Reduce your major fixed costs
If you’re saving for a down payment, you’ll need to cut back on your expenses where possible. Though it’s important to cut out obvious excess where you can first, it’s worth considering your big expenses, like rent and transportation, before the little ones. Reducing your major fixed costs is one of the most effective ways you can minimize your spending and boost your savings overall.
As far as your living situation goes, moving in with family for a year or getting a roommate could help cut your living expenses in half. You could trade in your car for an older model, or if your situation allows for it, get rid of it altogether and save your monthly costs towards your down payment instead. Though it can be tough to part with the material comfort of living alone or driving a new vehicle, these larger changes are more likely to have a tangible impact in helping you save for your home than occasionally cutting out smaller purchases like coffee and lunches.
4. Automate your savings
Never underestimate the power of automating your savings. By setting up an automatic transfer into your down payment fund each pay period, you take the work out of consistent saving. That way, you won’t shortchange yourself or skip saving altogether when the temptation to spend gets strong.
🏡 In honour of QUBER users who are saving for their first home, we designed the Home Down Payment Challenge. Choose between saving $348 bi-weekly or $695 monthly and we’ll reward you with a cash incentive each time you save – within 36 months, you’ll have saved $25,000 and earned $510 in incentives from us! You can join the Home Down Payment Challenge by going to the Challenges section of your app, clicking ‘Add a Challenge’ at the bottom of your screen and scrolling down to find the Challenge. For more info on Challenges, click here.
5. Carry cash only
Minimizing your spending is key to help you make up your down payment as fast as possible. If you’re the type who makes small but frequent purchases mindlessly, one way to reduce your spending is to leave your cards at home and only carry cash with you.
If you carry a credit card with you wherever you go, it’s easy to feel like you have thousands of dollars to spend in your pocket. Credit card companies know this, and they love it! The reality is, you don’t – you’ll have to pay for everything you buy eventually (and maybe even more in interest fees). Instead, if you only have a finite amount of money on you, you’ve automatically got boundaries placed on your spending so you’ll be less likely to buy things you don’t need. This is a particularly useful strategy for when you go shopping with a list, like with groceries, and have a clear idea of how much money you’ll need to make your total purchase.
6. Look for first-time buyer’s credits
If you’re likely to make your big purchase soon, be sure to investigate all the tax credits and other bonuses you may be eligible for if you’re a first-time buyer.
For example, if you buy your first home in 2022, you’ll be eligible for a $5000 tax credit from the Government of Canada for the tax year. You’re still going to have to save a great deal on your own to get where you need to be, but taking advantage of all the perks available to you can help you get there faster and shouldn’t be ignored.
7. Meet with a financial planner
We all make financial decisions every day, but very few have the long-lasting impact and significance that buying a home does on the rest of our lives. So, if you’ve never met with a financial planner before, preparing to make a down payment on a home is a great reason to start.
Meeting with a professional will help you better understand the financial realities of home ownership and give you a more well-rounded idea of what makes sense for you. It can also help you identify all the credits you may be eligible for, educate you on how to prepare for the continuous costs of home ownership and create contingency plans in the event that things don’t go according to plan.
Final Thoughts
Though it’s not for everyone, owning a home is a great investment that can help you build equity over time and gain more control over your living situation than is possible with most renting agreements. Like any long-term financial goal, saving for a down payment can seem like an insurmountable task to achieve if you don’t have a strategy in place. But, with a solid plan and your commitment to the goal, it can be yours sooner than you think!
