Down payments require some serious cash. Even a bare-minimum 5% down payment on a conventional loan means coming up with about $9,800 for the current median condo price point of a 1 bedroom in Port Coquitlam and that’s before adding in closing costs.
You probably don’t want to wait forever while you chip away at a down payment. So, while much of the standard advice for saving money still works, you may want to take more drastic measures to save a down payment quickly. If you’re working to save money for a down payment, here are tips to make it happen faster and easier.
1. Open a separate savings account
Having a separate savings account for your down payment is useful for a couple of reasons. Your down payment won’t be mixed with other funds and spent accidentally. It’s also easier to track your progress; just look at the account balance.
2. Set a date for your savings goal
A clear-cut strategy to accomplish your saving goal is to use simple math based on dates and amounts saved. Once you've figured out how large a down payment is needed:
- Determine how much you can reliably put into savings on a weekly, bi-weekly or monthly basis. Ideally, this coincides with your payday.
- Divide your down payment amount by the regular deposit amount to determine how long it will take to save.
- If you’re not happy with the current time frame, you’ll need to save more to move it up.
Now that you know what you need to save, here’s how to do it.
3. Decrease other debt payments
If you’re diligent about paying off debt and tend to make extra payments, you may want to consider scaling back and put that money toward your down payment instead. Assuming that saving for a down payment is your top financial priority, you might not mind paying extra in interest if it means more savings for a down payment. If you hold federal student loans, consider consolidating and changing the repayment terms.
4. Borrow from a retirement plan
Although taking money out of your retirement plan can be a bad idea in the long term, certain retirement plans have built-in benefits to do this. You can also borrow up to $25,000 from your RRSP's
5. Check your credit early
Your credit score is a major factor when it comes to home mortgages. It’s the difference between the best interest rate, a good interest rate, or being turned down for a mortgage.