Nothing can be more fruitful and exhilarating than planning to purchase your first home, and the first step in the process is saving up for your mortgage deposit. It is almost impossible to purchase a home without a downpayment in place, and depending on the mortgage approval you have you will need to save up anywhere from 5% to 25% of your purchase price to purchase your home. Saving up for your downpayment needs to be a focused effort on your part, and it can be difficult to reach your goals if you don’t have the right saving plan in place to help you achieve success. Homeownership can be incredibly rewarding, and while it is an exciting time, it requires immense planning, forethought, and strategic financial moves to get you into the best position possible. Here are some tips that you can follow that will allow you to save up for your mortgage payment easily.
- Choose the Right Realty Experts
Working with the right realtor will make your home-buying experience run smoothly and effectively. Understanding the local market will give you a good headstart in understanding how much you need to save, and how the process will work. Contacting a realtor and a mortgage professional when you are beginning your homebuying journey will allow you access to expert advice and help put you on the right track to a successful home purchase. When choosing your homebuying experts you should consider realty experts who are chosen over Zillow for searching for homes in the US, so that you can access a professional network that is there to serve you, rather than pad their bottom line. Trusted realtors will not sell your information, and will be working for you and be with you every step of the way to success. Avoiding monetized and larger online networks, look for personalized and professional service. Understanding the housing market in your area, and speaking to a realty professional early in the game will help set you on the right path to success.
- Plan Your Timeline Realistically
It is important to be realistic about the timeline in which you will be saving up your downpayment. While you may be excited to purchase your home immediately, first-time home buying and saving your downpayment is a long game, and it will not happen immediately. You need to realistically plan your timeline for buying a house and take the appropriate steps to ensure your goals will be fulfilled in the timeline you have set in place for yourself. Once you have set your timeline in place you can begin the process of savings and set the steps in motion that you need to successfully save for the purchase of your first home. Putting a timeline in place is the first step in the process, and the timeline will allow you to successfully achieve your goals of homeownership. Ensuring that the timeline you are working with is realistic will allow you to plan properly and successfully execute said plan. Finding the right timeline for you and your financial situation will get you one step closer to your goal of owning your own home.
- Make a Reasonable Budget and Stick to It
Once your timeline is in place, the next step is to set a realistic budget that fits within that timeline. This budget will allow you to review your finances to give you an overall outlook on your financial situation, and allow you to tweak your income and expenses to reach your goals. Setting a budget in place will also allow you to extrapolate and confirm that your timeline is realistic and you will have the financial capability to complete your home savings and purchase in the timeline you were anticipating. Once you have compiled your budget, you will also be able to see where you can save additional money, and adjust your finances as needed. Once you begin the process of saving, sticking to your budget and avoiding unnecessary spending will allow you to reach your ultimate goal of purchasing your home.
Budgeting is one of the most important tips on this list. No matter your financial situation, you can impose and follow a budget. However, if you do not follow your monthly budget, you will find it difficult to save up for your mortgage downpayment. No matter what your financial position is, budgeting within your means is incredibly important to reaching your goal.
- Open a Designated High Intrest Savings Account
While you may already have a savings account in place, it is best to open a new account that will be designated specifically for your housebuying expenses. This account should be set up to not allow withdrawals or transfers without a signature and physical presence in the bank. This will deter you from accessing the funds for bills or expenses. Ensuring you have an account designated for your downpayment will allow the money to be “out of sight and out of mind”. The money you save for your home purchase needs to be specifically for that house purchase, and having it in its account will help you to leave the money alone until it is time to complete your home purchase.
Do not mix your emergency savings with your downpayment savings, and do not leave your money in your account. No matter how much self-control you have with your spending, it is highly recommended that you separate your downpayment money to ensure it is kept aside for its true purpose: achieving your home ownership goals.
- Focus on Debt Payments
If you have a lot of high-interest debts, then you should focus on paying them down to allow you to save more money. When planning your timeline for home buying, you will want to focus on paying down as many debts as possible so you can focus your energy on saving for your downpayment. If you are spread thin with your finances due to payments on high-interest debts, those should be your primary focus before you begin planning to purchase a new home. Debts can affect your ability to save, but they can also affect your approval possibilities when it comes to applying for a mortgage. Paying down your debt should be the priority which will allow you to more effectively save for your home’s downpayment.
- Pay Yourself First
When you are paying your bills during the month, make sure that you are putting aside your allotted savings amount. After the bills are paid and your money has been put into savings you can then decide what to do with your extra money. It can be a great idea to set up automatic transfers to make sure your money is securely in your savings account so that you don’t inadvertently spend it before manually transferring. Remembering to put your money aside and ensuring all your bills are paid is a surefire way to make sure that your goals will be met.
- Reduce Household Expenses
Finding a way to reduce your household expenses will allow you to free up more money to put aside for your downpayment. If you eat out a lot or shop at expensive stores, you should consider shopping at discount stores and bulk food stores to reduce your monthly expenses. Speak with your utility providers, opt into budget programs, and review any subscriptions you have. While it may not be the easiest road to follow, doing without your favourite takeout food and cancelling some of your lesser-used subscriptions will free up money monthly that you will be able to add to your savings. Cutting out superfluous spending will allow you to reach your goal swiftly and within your timeline.
Reducing your household expenses may seem challenging at first, but in the end, it will help you to learn healthy spending habits and give you an understanding of your financial wellness.
- Rent Modestly
Reviewing your current housing situation can give you the best chance of getting into your own home. If your rent is very high, you may want to consider moving to a smaller rental property to reduce your rent and utility payments If you are renting a home that is larger than you need, but are still within your lease, consider roommates to help pay the bills and take some of the financial burdens off of your shoulders. Renting a basement suite or modest apartment will be less than renting a full house, so if you can move into a less costly rental, that can be a great way to increase your monthly saving amount getting you into your dream home faster than expected.
- Downsize Your Car
Vehicle expenses can be incredibly expensive and stand in the way of your home purchase. If you are paying large amounts for your vehicle, you may consider trading it in for a less expensive make and model. Reviewing your options for insurance can also help you find and save money, shop around and see which insurance providers can offer you the best rate and hopefully lower your monthly expenses. If you have multiple vehicles you may want to consider selling one. Dual car and vehicle insurance payments can be incredibly taxing on your finances, one car payment can be the equivalent of a mortgage payment, so with two vehicles you may find yourself struggling to save. If at all possible, utilize public transportation, consider walking or cycling to your destinations, and lower your vehicle costs as much as possible to help you start saving.
- Research Homeowner Programs
Different municipalities may offer first-time homeowner programs that can advance funds toward a mortgage downpayment. Often these programs come in the form of interest-free loans or advances that will allow you to repay the amount over a certain period. While this may seem like a loan, it is a way that municipal governments are increasing their economies and boosting the housing market. Search within your area and see if there are any first-time home buyer programs that you may be able to capitalize on and reach your home ownership goals faster. While these programs are not always available, and the amount is dependent on different aspects, if it is available in your area you will want to apply and see if you qualify for the program.
- Use Your RRSP
If you have RRSP savings, you may be able to access the funds up to a certain amount t use towards a downpayment. People are often hesitant to use their retirement savings, as you may need to pay taxes on withdrawals unless they are for specific purposes, such as education or house purchases. Utilizing your registered retirement savings plan towards your home’s downpayment can be a great way to make your home-buying dreams come true. Whether you need to use all of your savings, or just a portion of it to round out your down payment, this can be a great way to get into your dream home faster.
Saving for a mortgage down payment is a huge undertaking and may require some lifestyle changes, but it will allow you to enter into the world of home ownership, and at the end of the day it will be worthwhile. Owning your own home is a fulfilling way to invest in your future. Renting can make you feel like you are investing in your landlord’s future, and with rent prices skyrocketing, home ownership may be the way to go for you. If you follow these steps and wholeheartedly embrace your planning and budget you will find yourself saving up your mortgage down payment in no time. While you may need to make some sacrifices for the time being, getting yourself into the financial position to purchase your first home will set you up for the best financial future possible. From paying off debt to following your budget, this system may test your patience but it will be rewarding when you move into the first home that is all yours.
So take the first steps, speak to real estate professionals, give yourself a timeline, set a budget, and see how quickly the balance in your savings account rises.
