In our most recent PSR Market Report, we revealed that the average price of a fully-detached home in Toronto for July was $1.3 million, while the average price of a condo over the same period of time was $532,502.
Which means — with a minimum down payment of 5% — you are looking at saving about $75,000 or $27,000 respectively as a down payment. And those figures swell when you factor in mortgage insurance.
So how do you do it, especially when juggling the hard living expenses you’re already on the hook for, not to mention maintaining a busy social life?
Simple! Just follow these crucial steps.
1) Goals, goals goals.
Unless you come into some sort of swift and sudden windfall, you likely aren’t going to come up with your down payment overnight. So break it into smaller targets that are realistic. Timely ones, too. Whether that means paying yourself first before other expenses, or putting aside a couple to several thousand dollars every year — or both — we’ll leave that to you to decide.
2) Don’t stop the hustle.
If you have a financial goal, then generating additional earnings is sure to help you reach it quicker. So look into part-time jobs to supplement your regular income — just make sure that extra money actually gets saved!
3) Track your budget.
It’s actually harder than it sounds. Thankfully, we’re in the age of apps, so let one take care of the hard work for you. We especially love Clarity Money, Mint and Digit — all of which help you save money without having to really think about it.
4) Consider a Tax-Free Savings Account.
Stop by your bank and inquire about opening up a Tax-Free Savings Account (TFSA), which will keep your down payment savings separate from your monthly operating expenses. And, therefore, out of reach. Not only will this discourage you from spending it prematurely, but a surging TFSA balance should motivate you to stay at it.
5) Reference the Home Buyers’ Plan.
Did you know the Canada Revenue Agency offers a Home Buyers’ Plan (HBP), a program which allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans to buy or build a qualifying home for yourself? If not, now you do. Avail yourself of it.
6) Hold onto your holiday haul.
Now that you are well on your way towards saving for your down payment, remember that Christmas, Hanukkah, birthdays and related celebrations typically mean a little extra cash coming your way. Yes, once upon a time, that would have made for some great disposable revenue — or an easy credit card payment. But alas, those days are gone. For now, at least. You have bigger fish to fry! So toss it right into your TFSA.
7) Also, save those tax refunds.
This one is pretty straightforward: put any refunds from your income tax toward your down payment savings. After all, each year it feels like ‘found money’, doesn’t it? So don’t waste it.
8) Don’t restrict yourself to houses only…
… Consider town homes and condominiums, as well. The reasoning is pretty simple. Lower purchase prices come with reduced down payment requirements.
9) Go outside of hot markets.
As long as we’re talking about lower purchase prices and reduced down payments, you can also expand your search for the perfect home by looking beyond blistering mortgage markets like Toronto.
10) Never lose sight of the prize!
That exclusive designer bag you can’t stop thinking about? The dream car you want everyone to see you behind the wheel of? Forget about them for now — for many years, even. Remember you set a goal and you are still trying to reach it. One which will prove to be the sweetest acquisition of them all.