Home ownership is a big dream for many young Canadians, and is likely the single biggest investment most of us will make in our lives. While saving for a down payment can be challenging, Farhaneh Haque, director of mortgage advice at TD Canada Trust, says that young Canadians can save for a down payment a little quicker by following a few simple rules.
"First, examine your budget and set a savings goal," says Haque. "Take advantage of online budgeting tools to gain insights into where you spend your money. Also remember that in addition to your down payment you will need to save for the additional costs involved with a home purchase, which include land transfer tax, moving costs and legal fees."
Next, curb your spending and increase your savings. "Even a small adjustment in your spending habits can go a long way toward helping you save a bigger down payment," says Haque. "For example, consider using transit to get to work instead of driving and paying for parking - it can really add up over time."
One of the most effective - yet overlooked - strategies is to put money aside before you can spend it. Haque suggests setting up a regular, preauthorized transfer service that moves a specific amount from each pay cheque into a high interest savings account. Making savings automatic is a simple and effective way to stay disciplined while saving for a down payment.
Finally, Haque reminds first time home buyers that they may be able to take advantage of the federal government's Home Buyers' Plan. "Those who have been actively saving for their retirement can access up to $25,000 from their RSPs to bump up their down payment when they purchase their first home. The RSP funds must be paid back within 15 years, so it is important to factor this repayment into your monthly budget."