If you have made the decision to buy a house, then one of the first steps is to gather the funds required for the down payment. In Canada, the amount of this down payment varies depending on the purchase price of the home.
For a purchase price under $500,000, a buyer has to put at least 5% down. From $501,000 to $999,999, the buyer has to place 5% down on the first $500,000 and then 10% on any amount of the purchase price that is over and above $500,000. For example, on a $750,000 home, the prospective home buyer has to save up (5% x $500,000 + 10% x $250,000) = $50,000. For any instance that a borrower does not put at least 20% down for the purchase of a residential property, they must have a good credit score, a strong credit history, and income that is strong enough for the homebuyer to be able to qualify for mortgage default insurance. Lastly, for any home that is a million dollars or more, a 20% down payment is the minimum amount required to obtain a mortgage.
As can be seen above, this can add up to quite a large sum that only increases at a steeper rate as the purchase price of homes in Toronto and other parts of Canada grows increasingly higher as time goes by. While it may seem like you need to save up an overwhelming amount to have enough for a down payment, thousands of Canadians become homeowners every year. If you have your sights set on joining that crowd, then this article may be able to help you get there quicker!
These are two of the more common ways of getting together the money required to save up enough to put towards a new home or investment property: (i) increase your inflows, income, and cashflow, and/or (ii) decrease your outflows and expenses.
There are a few ways to increase disposable income. However, these may or may not be feasible depending on the time constraints and priorities of the future homebuyer. Below are some of the ways that total income can be enhanced.
Bonus tip: Research and take advantage of First Time Homebuyers’ Programs. These are exclusively made to redevelop some parts of the city or to enable buyers to afford homes in expensive cities such as Toronto, Mississauga, Aurora, Vaughan, Newmarket, Burlington, Oakville, Scarborough, Pickering, Ajax, Oshawa, Hamilton, Niagara Falls, St. Catharines, Kitchener, Waterloo, Guelph, London, and other major cities across Ontario. If your city or province offers such a program, it could very well be worth it to get interest-free, low-interest or equity share loans (depending on the program structure in your city or region).
While increasing income and other forms of cash inflows can often be the faster way to reach your financial goals, decreasing expenses and other types of cash outflows can go a long way towards helping you save up a larger down payment. With a few simple changes to your spending habits and/or lifestyle, you could suddenly find yourself in a much more comfortable financial situation in no time! Some ways to do so are listed below:
Saving for a down payment may seem like an uphill battle, but keeping a tighter wallet (at least in the short term) or finding new streams of income can help ease this burden substantially. While this may require practice and discipline (and maybe a few late nights if you choose the overtime/freelancing route), your journey to buying a home can be that much closer to completion. Temporary sacrifice for long term gain might be the answer you’ve been looking for.