Is it your goal to be a homeowner? As the biggest investment of your life, you’ll need a sizeable amount of cash to afford the down payment—not to mention income to sustain the monthly mortgage payments, and funds for home improvements. While the real estate market in Toronto can be frustrating for millennial first-time home buyers, here are a few tips to help put you in a better financial position for purchasing a home.
Know your numbers
The cost can be overwhelming, but crunching the numbers is necessary to get started. Use a mortgage calculator to get an idea of how much you need to save depending on the type of property you’re looking for. You’ll need to have 20% of the cost for a down payment, plus the monthly income to cover your mortgage payments. And for a condominium, don’t forget to factor in maintenance fees.
Use a budget
Once you have a target amount to save, it’s helpful to create a budget so you can see exactly how you’re spending. It will help paint a picture of where you can cut back, allow you to make adjustments, and help calculate how long it will take to reach your goal.
Cut down expenses where you can
The reality is that it’s harder for millennials to buy a house today than it was for previous generations, and it’s not because of lifestyle choices. However, if it’s a personal goal, you’ll likely have to make some sacrifices to save—maybe it’s cutting back on streaming services, limiting takeout in favour of cooking, or something more drastic like living with a roommate to save on rent. Take a look at your budget, decide where you’re willing to cut back, and put that saved money aside.
Maximize your money
Let your saved money work for you. If you’re not comfortable investing in stocks, at the very least put it in a high-interest savings account or try a Canadian Guaranteed Investment Certificate (GIC).
Save those financial wins
Though it’s tempting to spend unexpected money like a bonus from work, a tax refund, or a monetary gift, put it straight into your home fund.
Find new income streams
The quickest way to build up your house fund? Increase your income. If there’s a way to make a little extra cash temporarily, it will help speed up your savings.
Take advantage of an RRSP
If you already have a Registered Retirement Savings Plan (RRSP), you’ll be able to withdraw up to $35,000 tax-free to use to purchase a qualifying home, as long as you pay it back within 15 years. If you don’t have an RRSP set up, it’s a good time to do so—plus any contributions you make are tax deductions.