5 Tips on Saving for a Down Payment

Home School Building 101

You’ve decided to take the big step of buying a house. Congratulations! But before you rush out the door to start house hunting, it’s a good idea to be prepared. One of the first things to consider is the down payment.

Start Saving for the Down Payment
Your first step should be to boost your savings. And the sooner you want to buy a home the faster you’ll need to save. Remember, the bigger your down payment, the smaller amount you’ll have to borrow for a mortgage. And, if you have at least a 20% down payment, you won’t have to pay mortgage default insurance premiums. That’s because financial institutions such as banks can’t provide mortgages greater than 80% of the home price unless it is insured.

By pumping up your savings, you’ll also be better prepared for the other expenses that come along with a new home — like legal fees and moving costs.

Start a Monthly Budget
You can begin building a down payment by creating a budget and deciding how much you can save each month. You’ll discover that even $100 per month can quickly grow into a sizable amount over time. Most banks have ways to help you save, too. Like automatic savings’ programs and creative plans that put money into your savings account every time you use your debit card to make a purchase.

Take Advantage of the Home Buyer’s Plan
The Home Buyers' Plan (HBP) is another excellent way to source funds. The program lets you withdraw money from your Registered Retirement Savings Plan (RRSP) to help pay for your down payment. The plan was created by the federal government and is for first time home buyers. You and your spouse or common-law partner are each allowed to withdraw up to $25,000 tax-free from your RRSP. Then you have up to 15 years to repay to your RRSP the amount withdrawn.

TFSAs can Help
Tax-Free Savings Accounts (TFSAs) are another good way to save for the purchase of a new home. Not only will your money grow tax-free, but you also won’t pay taxes on withdrawals you make. You don’t have to choose between an RRSP and a TFSA, either. You can use both.

Morrison Can Help
At Morrison Homes, we provide an alternative option where you can split the balance owing on your down payment into 6 equal installments while your home is being built. Ask one of our Area Managers for full details.

Saving a down payment can be daunting, but with these 5 tips and a little discipline, you'll be able to make your dreams of home ownership a reality.