When buying a home, most people struggle with financial problems; therefore, planning ahead for your down payment is a crucial step to getting prepared.
1. Set a goal
After identifying the down payment you need, start to allocate a portion of your income into a monthly saving amount. You might need to open a savings account and start cutting down on your expenses to ensure that you can save money every month. Setting up an automatic saving schedule is a great way to remind you about this.
2. Cut your expenses
Firstly, start to write down a list of expenses that you need to spend for a week, categorize them, and identify which ones can be reduced. For example, you might cook rather than dining out or ordering food. If you struggle to make the list, some applications can help you do this faster, for example, Money Manager Expense & Budget.
3. Pay off your credit card debts
Saving is not efficient if you still have a ton of debt in your account. Therefore, checking your credit card and making sure that you pay all your debt before saving is important.
4. Create additional income
There are many things that you can do to earn more money aside from your job. You might consider getting some projects to work on as a freelancer or selling old items on Kijiji or Craigslist.
5. Research the First Time Homebuyers Program
Some cities have these programs to support homebuyers financially; however, they have specific requirements. You can check this program online or with your city hall to see if you are eligible for this program.
6. Tax-Free Savings Account (TFSA)
If you are 18 years or older, you are eligible to open a TFSA account. The funds in this account are tax-free, and you can withdraw them anytime you want. Since interest earned on investments in a TFSA savings account are tax-free, it’s easier to achieve your savings goals.
7. Borrow From Your Registered Retirement Savings Plan (RRSP)
You can use up to $35,000 from your RRSP to help finance your down payment on a home. You need to repay the amount withdrawn back to your RRSP within 15 years, starting from the second year after you made the withdrawal. If repayments are made as at when due, there is no tax implication or penalty for withdrawing the funds.
Again, this is a long-running process so you need to keep patient and persistent until you achieve your goal and owning a dream house will come true. I hope these tips will help you to buy a new house!