Being a first-time homebuyer can be extremely scary, and certainly for many people the sheer amount that homes cost and the monthly mortgage can be a deterrent to even starting the process of looking for a home. That said, really considering how you can save in both smart and realistic ways will help this seemingly massive elephant get eaten one bite at a time. Here are 8 great ways to start saving to buy your first home.
1. Prioritize saving
This may seem obvious but it takes rewiring your brain a bit to put saving to buy a home first. Simple things like choosing not to go on vacation, and instead putting that money into savings, will make a major difference. Examine where you can cut costs: are there luxuries that you have on a regular basis that you can cut down on like going out for lunch at work, fancy coffees everyday and so forth? Of course, you need to still enjoy life, so don’t start making your food budget big enough for only Mr. Noodles! Be realistic, but cut where you can. Even saving $2 a day for 7 days is $14 and for the year is $730; that’s huge!
2. Pay off credit card debt first
Look to be as debt-free as possible as soon as you can. This is especially true with credit cards and lines of credit because the interest can really hurt over time. The lending bank for your mortgage will also keep those debts in mind when looking to approve you. You want to continually use your credit card so that your credit is great over time, but make sure you’re paying it off. Keep in mind that student loans have a very low interest rate so if you have that and other debts then prioritize paying off the one with the highest interest rate first. Certainly it is always better to go into buying a home debt-free if possible.
3. Do you need a car or need to have more than one?
While cars can be extremely important and necessary, sometimes they aren’t and can be a huge burden on your finances, so you need to assess whether it is truly vital for you to have a car or even multiple. Public transportation can be inexpensive, and even better, what about company carpooling? Cutting your costs for a vehicle and putting all of that to saving makes a major difference.
4. Take raises from work or other financial windfalls and put into savings
When you get a raise at work or get unexpected bonuses such as income tax returns, gifts, bonuses or etc, put those straight into your savings. Figure out what your base needs are financially, and put the rest into savings. If you are living comfortably, and then you get a raise, there is no need to increase your spending or fixed costs when you could put that money right into the bank.
5. Get an RRSP or if you have one, borrow from it
RRSPs can be incredibly useful when you are going to buy a home, because it allows you to borrow a chunk of money. That said, you do need to pay it back within a certain amount of time or you get charged taxes as if the borrowed money was income.
6. Get a TFSA for saving
Tax free savings accounts are awesome for savings and you can set up automatic payments so that you don’t even notice the money going out of your other accounts. It is inexpensive and is meant to sit for a long period of time. Look into mutual funds as well for 5 years and up, long term savings.
7. See if your city has a first time homebuyers program or other tax benefits
Some cities have first-time homebuyer programs and other benefits specifically for making buying your first home more affordable or simply easier. See what your city can do for you!
8. Find out how much you need to save
So you’ve set up how you are going to save but you also need to be able to accurately assess how much is a good amount to save. It isn’t helpful if you simply save and save and then get stuck not wanting to finally buy a home because you “feel” like you could save more. Find out how much you actually need and make a plan around that. It will make your saving goals more relatable for you and of course, you’ll be proactively researching mortgages and hidden fees before you get hit with them. This also gives you a good idea of what your timeline is for buying and paying off your home.
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