Tips for saving for a down payment

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So, you’re ready to make the leap from renting into the wonderful world of home ownership. There’s no doubt that buying a home is a major life milestone, and one that comes with no shortage of tough decisions along. Should you buy a condo or house? City or suburbs?

But let’s be honest—before you can even think about where the couch should go and what colour to paint the walls, how the heck do you manage that down payment?

Your down payment will be a huge factor in getting pre-approval on a mortgage amount. You’ll need a minimum of 5% of the purchase price—and the more you can put down, the more you can save in the long run.

But how do first-time homebuyers save up that much dough? We asked three sets of new homeowners to find out how they made it happen. Meet Olivia and Ava, Amanda and Matthew, and Carly and Hugh.

What was your down payment savings strategy?

Olivia & Ava: Our strategy was to go slow and steady. We knew we wanted to buy a home, so we started saving as soon as we both had jobs. It was small amounts like $100 per paycheck, but that added up over several years.

Amanda & Matthew: We knew our incomes would be fixed for the short-term, so our strategy was to limit unnecessary lifestyle expenses and saving consistently month-to-month. To do this, we first created a spreadsheet to track expense categories to identify opportunity areas. It was surprising to see how much we spent on non-essential items. We also opened a low interest line of credit and transferred any credit card debt to lower monthly interest payments.

Carly & Hugh: We knew that if we could save 20% for our down payment, we could avoid the added expense of having to pay for mortgage default insurance. Saving for a few years directly out of university was ideal because we essentially set aside our income tax rebate each year. It was money we weren't depending on, which made it easy to put it away for a mortgage.

As a medical student, I also had access to a personal line of credit. Our mortgage lender allowed us to use the line of credit for half the down payment, if we could prove we had the other half saved up. Although borrowing $20,000 for a down payment wasn't ideal, combined with the $20,000 we saved up, we were able to avoid the mortgage default insurance.

Did you make any lifestyle changes to save?

Olivia & Ava: The only lifestyle change we made was cooking for ourselves more. We tried to limit take-out to one night per week and we invited our friends over instead of going out, which can really add up.

Amanda & Matthew: We made a few adjustments in our monthly spending, primarily saving on food, entertainment, and travel expenses. The cost of food and alcohol at a restaurant, even if you’re only having it occasionally, can add up each month. An “all or nothing” approach doesn’t necessarily set you up for success, but setting limits allowed us to save quickly and painlessly.

We also didn’t travel outside of the province while we were saving and instead decided to explore our own province.

Carly & Hugh: We didn’t make any major lifestyle changes, but by making sure that we saved up our tax rebates, we weren’t spending that money on fun things, like vacations.

Any tips for someone that’s looking to get started on saving for a down payment?

Olivia & Ava: Take a hard look at your spending habits and see where you can save. A simple switch like making your own coffee instead of buying one could be the $50 a month you need to be in a house one year sooner than you thought you would be.

Amanda & Matthew: Find out where you’re really spending your money and track your current expenses—down to the dollar. Then set a reasonable savings goal and put a timeline on it. It’s easier to accept an aggressive 12 months of “tightening the belt” if you know there’s a positive end in sight.

Carly & Hugh: Even if you’re just getting started, talk to a financial expert. They can help you come up with a strategy and set a timeline that works with your budget. It can help make saving for that down payment feel a little less daunting!

Have more questions about mortgage options, saving for a down payment, or general home-buying basics? Check out our Guide to Homebuying or learn what other first-time homebuyers wish they had known when they bought their home.