How to save for a house

It's never too early to start saving for the purchase of your first home. If every small gesture counts, good planning can lead to big savings and to completing your project more quickly.

We share some tips for you to save for your home.

8 ways to save for a house

1. Set up a budget and categorize your expenses
2. Pay your debt first
3. Maintain a good credit score
4. Save automatically
5. Review your consumption habits
6. Set aside all excess money
7. Get help from loved ones
8. Take advantage of available programs and grants

Understanding the costs of buying a property

An important step when considering buying a property is to understand the associated costs. Take the time to educate yourself so that you have a good understanding of everything involved in buying a property, including from a financial point of view. This way, you will be better equipped to make clear decisions in order to save.

Read our article to learn about the false beliefs that can influence your decisions: 6 myths about buying a property.

Raise money for your down payment

The most important amount to save is the down payment. This is an initial amount paid when buying a property.

In general, depending on the price and the type of property, the minimum amount of a down payment is 5 to 20% of the sale price.

Other expenses related to buying a house

In addition to the down payment, you must consider the other costs related to the purchase of a property in order to plan your budget.

Some expenses will be recurring, such as mortgage payments, municipal taxes, home insurance, maintenance costs, electricity, Internet, etc.

After the down payment, the most important amount to plan for in the short term is for the closing costs, which are payable at the time of the closing of the transaction during your visit to the notary.

The closing costs correspond to 3 to 5% of the purchase price of the property.

8 ways to save for a house

1. Set up a budget and categorize your expenses

The first thing to assess is your budget. By first determining what your needs are for the purchase of your property, you will be able to put a plan in place.

A great way to plan your budget is to categorize your expenses. Create categories that meet your needs: groceries, car, contingencies, hobbies, debt, etc.

You will be able to see how much you spend monthly on each category to determine how much you can put towards the purchase of your home.

Moreover, if you put the money dedicated to the purchase of your house in a separate account, you will not be tempted to use it for other reasons.

Among other things, you could take advantage of the tax-free first home savings account (FHSA), which will come into effect in April 2023. As its name suggests, this account allows you to invest money that will be tax-free and will be used to purchase your first property. Ask your financial institution for more information.

2. Pay your debt first

How can paying off your debt help you save for a home purchase?

Before putting money aside, it is strongly recommended to pay your debt. Investing money with interest while you pay higher interest for your debt at the same time makes you lose money. In addition, paying off your debt will reduce your expenses when you are a homeowner.

3. Maintain a good credit score

Having a good credit score directly influences your qualification for a mortgage loan. The higher your score is, the more you can benefit from a favourable mortgage rate, which will reduce your monthly payments and save you money in the long run.

To maintain a good credit score, make sure you:

  • Meet bill payment deadlines
  • Pay off your high-interest debt first
  • Keep your balances low
  • Don't multiply credit cards
  • Etc.

4. Save automatically

With your budget in place, you have determined how much you can set aside to save for the purchase of your home. Automating a transfer of this amount at each of your paycheques or each month will allow you to never forget or use this money for something else.

5. Review your consumption habits

Saving for a home means making compromises. Reviewing your expenses and assessing where to cut is a necessary evil to achieve your goals.

A few things to reassess where you could save money:

  • The grocery store (watch for discounts, they come back approximately every 6 weeks)
  • Your outings and hobbies (a movie at home is less expensive than going to the cinema)
  • The use of your car (maybe even sell it)
  • Your vacations
  • Your energy consumption at home

This exercise will also help you better manage your expenses and save money in the long run.

6. Set aside all excess money

Every dollar counts when buying a property. Thus, place each available surplus dollar, such as your tax return, in your dedicated account.

7. Get help from loved ones

Financial assistance from a relative can be a huge boost in buying a home, no matter how much the gift is. However, it must indeed be a donation and not a loan. You don't want to add the repayment of this loan to your other expenses like your monthly mortgage payment.

8. Take advantage of available programs and grants

Take the time to learn about the different programs and grants available for buying a home, such as the FHSA mentioned above, that could help you.

For example, another beneficial program is the Home Buyers' Plan (HBP). This plan allows you to withdraw up to $35,000 from your RRSPs to pay the down payment on your first home.

These tips will help you save more for the purchase of your first home. When you are ready to start, contact your real estate broker to accompany you from the first steps.

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