Saving for a down payment is a significant hurdle for many first-time home buyers. Adopt a few of our favourite financial strategies, along with careful budgeting, to help you build your savings, allowing you to achieve your dreams of homeownership.
Understanding the Minimum Down Payment
A down payment is the money you pay upfront in cash when purchasing your home.
The price of your new home determines your minimum down payment. For homes under $500,000, the minimum down payment is 5%. For homes over $500,000, you’ll need 5% on the first $500,000, plus 10% on any amount after that. For homes over $1,000,000, 20% is required.
How to Save Money for a Down Payment
Cut Your Expenses
Creating a budget is a great first step in saving for a down payment. Calculate how much you can afford for a home, then work towards a down payment based on this number.
Include things like rent, food, and other necessities in your budget, then decide how much you’ll dedicate to a savings account. Try to cut down on luxuries like dining out, entertainment, and travel so that you can grow your savings each month.
Move Your Money into a High-Interest Savings Account (HISA)
High-interest savings accounts help you earn interest on your savings, and every bit counts! Try shopping around at digital banks or credit unions, which typically offer more competitive rates.
Open a First Home Savings Account (FHSA)
A First Home Savings Account is a new type of savings account created by the Government of Canada. You may contribute up to $8,000 per year, up to a lifetime maximum of $40,000, and take a tax deduction to offset the tax you paid on your deposits. Your savings in a FHSA can be grown and withdrawn tax-free.
Open a Tax-Free Savings Account (TSFA)
A Tax-Free Savings Account allows you to grow your savings without paying income tax on it, making it a great way to keep more money in your pocket. Unlike some investments, you can make withdrawals whenever you wish.
Use Your Registered Retirement Savings Plan (RRSP)
You may use funds from your RRSP to help you make a down payment through the Home Buyers’ Plan. You can withdraw up to $35,000, tax-free, for your down payment. However, you need to repay this amount within 15 years.
Become a Homeowner with JAAG Properties
Homeownership isn’t out of reach with our Rent to Own program! Own your home in as little as 3 years, even if you have bad or no credit, are newly divorced or separated, or are new to Canada. We provide the tools and mentorship to allow you to live in your home while you save money for a down payment. At the end of your term, you’ll purchase your home from us and become a homeowner!
Apply online or contact us today to learn more about how we can help you achieve your dream of homeownership.
