Are you looking to buy a house and worried about the expenses that come with it? I understand that buying a house is a big commitment and requires years of planning. One of the biggest expenses while buying a house is saving for a down payment. Do you know that buying a non-condo house in Toronto takes 24 years while a condo house would take 4.25 years? For buying a house in Vancouver, you have to save for 34 years in order to pay the down payment. Quite expensive isn’t it? That is why planning for a down payment is necessary. Thinking about how you can do it? Well, I have got you covered with the 8 best ways to save for a house. Without any further wait let’s get started.
8 Best Ways to Save for a House
1. Planning, Planning, and More Planning
Before you buy a house, in reality, you need to buy a house with a “budget” first. It is a must that you have to plan and prioritize your goals and work towards them on a regular basis. Make buying a house a top priority and start saving for the down payment. In Canada, you have to pay at least 5 percent as a minimum down payment. You can see the table below to know that how much money you will have to save for a down payment. You can set your expectations clearly.
|If the price of the house is||The Minimum Down Payment You Need to Pay is|
|$500,000 or less||5% of the purchase price|
|$500,000 to $999,999||5% of the first $500,000 of the purchase price|
10% for the portion of the purchase price above $500,000
|$1 million or more||20% of the purchase price|
Based on these amounts, plan your budget for buying a house considering your income inflows and outflows. Deposit a certain amount for the down payment in a separate bank account or investment account and forget that you invested it until the amount you want is saved.
2. Clear Your Debt Slate
The best way to save for a house is to take smaller steps that can lead you to a brighter future. And clearing your debt is one of those steps. Do you know that in the year 2019, the overall Canadian debt was 177 percent of the total disposable income? In simple words, it means that if you have an income of $100, you owe $177. Out of which the mortgage debt amounted to 40 percent.
It is understandable that you have to take out a mortgage but there are other debts that you can pay off like paying off your vehicle loan, education loan, or credit card debt. Set up a habit of paying off debt every month in whole and improve your credit score because that would reflect when you will apply for a Mortgage Loan.
3. Do Side Work and Increase Your Income
There are various methods which will help you to have additional income apart from your full-time job. I have listed a few side hustles that you can take in order to make money from the internet or make money from home in Canada. These tricks are simple and you can easily make $1000 every week or every month based on the time that you invest.
- Doing video or audio transcribing
- Starting a reselling business
- Listing your house on Airbnb
- Taking online surveys
- Writing a blog
- Teaching languages online
- Selling your art or niche
The sky’s the limit when it comes to starting something on the side. Decide what you love to do and based on that start working in your free time. This is one of the best ways to save for a house.
4. Choose Better Alternatives in Your Daily Life
Here, choosing alternative means to choose things that can save money. For example, cutoff liabilities like a car for a better way that can help you save. Cars are seen as one of the luxuries but in reality, it is not an asset, it is a liability. Over a period of time depreciation reduces its value. You can always use public transport or carpooling to save some money for your dream house.
The same thing can be applied to the food. If you have a habit of going to luxurious dining every week, cut that off. I am not saying that you should not enjoy your life but instead of going every week, you can choose to go once or twice every month. This way you will enjoy your life but also save for your future.
5. Try to Reduce Your Expenses
The biggest part of saving is to reduce expenses. This is one of the best ways to save for a house. For example, list out all your expenses from groceries to taking vacations or entertainment. Avoid expenses that are not necessary for nature. For example, if you like to go out to movies frequently for entertainment, you can always buy a subscription for Netflix or Prime. This will help you save some money.
If you want to go for a vacation then you can always look for places that cost less or you can go in the off-season which will help you save on flight and hotel bookings. Your expenses are in your hands, so use your money wisely because even money costs a lot.
6. Taking Advantage of a Tax-free Savings Account
The Canadian government provides the facility of tax-free savings accounts aka TFSA. You can always save your money in this account and when you receive it back, it would be free from income tax. It is always better to plan for such things by consulting an expert.
7. RRSP Account is a Lifesaver
Do you know that you can withdraw around $25,000 from the RRSP (Registered Retirement Savings Plan if you’re buying your first home? This is a big amount for a down payment. You can also get a tax credit here. Even apart from RRSP, there are certain other first-time homebuyers programs that you can avail of. I have listed these programs below. They would help you in saving for a down payment; plan in advance and plan well.
- Home Buyer’s Plan (HBP)
- First Time Home Buyer Incentives
- Home Buyer’s GST/HST Rebates
- Rebate on Land Transfer Taxes
8. Invest your Money Wisely
This is one of the underrated ways when it comes to the best ways to save for a house. We have already talked about saving money in a tax-free account or in RRSP but even apart from that, there are various financial instruments that can give you a good return over a period of time. Such financial instruments include equity tools like stocks.
You can also invest in mutual funds or Systematic Investment Plans (SIPs), bonds, etc. It is necessary that you are aware of your risk appetite and based on that take your decision. It’s also necessary that you educate yourself about financial instruments before investing. Talking to an expert or financial advisor is always a good thing, so utilize that.