Saving For A Down Payment

Sutton Quantum

Saving For A Down Payment


Buying your first home is a magical feeling, but with the new Stress Test in effect saving for a down payment is trickier than ever. Many homeowners will tell you that meeting the minimum for a down payment was tough, but that looking back they wished they had put up more money upfront. The great thing about saving is that once you’ve created positive financial habits for yourself, you’ll be well equipped with strategies to help you save for things like retirement, home renovations, or a vacation. We’ve outlined some of the best ways to save for a down payment and other future financial goals.


Prioritize and Budget

The fact that you’re saving shouldn’t mean the equivalent to taking a vow of poverty, but you will have to adjust your lifestyle - if only temporarily. The key is to determine what you’re willing to live without versus what will negatively affect your quality of life. After cutting out things like buying coffee every day instead of making it at home, the best way to identify areas to limit your spending is to create a monthly budget. If that sounds complicated or intimidating,click here to learn how to create a budget.

Pay Off Consumer Debt

If you have a lot of consumer debt, you’ll find it difficult to qualify for a mortgage. Before applying for a mortgage, do what you can to minimize any debt and interest you’re paying elsewhere. The easiest way to do this is to start with your smallest high interest debt, and pay it off as quickly as you can. Then take the minimum payment from that debt and use it to help you pay off the next small debt that has the highest interest rate. Once you have that one paid off, the two minimum payments that you used to pay for those smaller debts can help you pay off your next debt faster (again, choose a small debt with a high interest rate). You will notice a snowball effect as the minimum payments you are freeing up help you to make larger and larger payments against one debt at a time. This is one of the fastest ways to pay off debt.

Sell Your Car

This may be one of the more difficult options logistically, but if you and your partner both have a car, downsizing to one vehicle between you can allow you to save thousands. You will still have plenty of options available to you - walking or cycling, carpooling, or even using public transit can be up to 80% less costly than owning a car.  If you take into account the cost of one monthly car payment, gas, insurance, and maintenance, the savings add up to around $9,000 per year for the average person. If it seems unrealistic, try parking your car for a few weeks or even months to see if you’ll be able to adjust.

Pay Yourself From Your Work

Let’s say you’ve hit a milestone at work and have been rewarded accordingly with a raise. Congratulations! Instead of celebrating, take that extra money and save it in a separate savings account. It may not seem like much, but it will add up. Do the same with any bonuses, sales commissions or tax refunds in you get from your work. At the very least, set up an automatic transfer from your chequing account to a savings account for a percentage of your paycheque as soon as your direct deposit hits.

Borrow From Your RRSP

If you have an RRSP, you’re able to withdraw up to $25,000 to buy your first home. If you don’t have one, you may see this as an opportunity to save money for your RRSP and at the same time get a tax credit to help reduce your taxes. The only catch to this program is that you have to pay the money back to your RRSP within 15 years. If you don’t repay the money, it is treated as income and you will have to pay tax on the money you withdrew as though it were income. Check with your financial planner or advisor to see if this option is right for you.

Open A Tax Free Savings Account

TFSA’s are an excellent way for young professionals to seriously start saving for the first time, and many people use these accounts for a down payment. As the name suggests, the funds in your TFSA grow tax free, so you won’t even have to pay income tax on the growth. This makes it a relatively painless way to save. Consult with your financial planner or advisor.

See If Your City Has A First Time Homebuyers Program

Imagine your city providing you with part of your down payment as an interest-free loan. Sounds too good to be true? It’s not unheard of for some cities to have a First Time Homebuyers program that does exactly that! The purpose of the program is twofold: 1) to help first time buyers afford a home in an expensive city, and 2) to redevelop part of the city that may be struggling. Winnipeg, MB and Surrey, BC have been known to offer up to $20,000 per couple under such programs! These programs usually have very specific requirements, so check with your municipality to see if such a thing exists and if you’ll be able to qualify.


Above all else, be patient but remain diligent with your saving. It takes years to save enough to buy a home, but getting in the habit of curbing your spending and preparing yourself financially and mentally for home ownership is a reward in and of itself. Finally, remember that this is a special time in your life - enjoy it, and look forward to the challenges ahead.