House hunting is both exciting and daunting—and sure to invoke a flurry of emotions! The business of purchasing a home is much more complex than finding the four-bedroom, single detached house of your dreams in the right neighbourhood. Coming up with the minimum 5% down payment, navigating fluctuating real estate prices, dealing with stagnating wages, and passing the federal stress-test can be challenging. But where there is a will, there is a way!
With the right strategy, a little patience, and some discipline, saving for your dream-home budget is achievable. Here are 6 tips to help you achieve that goal in 2020.
1. Track your spending
Before you can begin to build a budget, you’ll need to have a complete understanding of how much money you make every month (after tax) and where exactly it all goes. To do this, look through your bank statements, make a detailed list of your transactions, and utilize financial apps like Mint, PocketGuard, and Clarity Money.
2. Cut your expenses
Buying a house is costly, but worth making financial sacrifices for. There really is no place like (your own) home! Some easy ways to cut spending and start saving include: cutting down on services, restaurant visits, take-out and delivery, daily specialty coffees, entertainment, and reducing online spending and trips to the mall. What might seem like minuscule transactions in the moment can easily add up to thousands of dollars over the course of a year. Another great area to cut costs is on parking. If you work downtown, or anywhere else where you have to pay for daily or monthly parking, opting for public transit instead can save you up to hundreds of dollars a month.
3. Get pre-qualified
Before you can start considering purchasing a home of your own, you need to know how much your bank is willing to loan you. Once you have an idea of the mortgage you pre-qualify for, including maintenance costs and down payment options, you can create a goal for a home you can actually afford. One rule that people often cite is the total cost of your home should be no more than three times your annual household income. There is also the 28/36 rule — household expenses don’t exceed 28% of gross monthly income and household debt doesn’t exceed 36% of gross monthly income.
4. Make your bank account work for you
Instead of putting your newly saved money into a savings account and ignoring it, consider investing in a balanced investment portfolio or a high-yield, low-risk bond. This can help optimize your short-term returns without any action on your part, helping you reach your down payment goal even faster. It’s okay if you don’t know anything about investing. An investment advisor or Robo-Advisor can provide an excellent starting point to entry-level investing and they do most of the work for you.
5. Explore all your options
When you are saving for a house, be sure to take advantage of all the tax breaks and banking options available to first-time buyers. A tax-free savings account (TFSA) allows you to save money without paying taxes on earned interest, even after you withdraw your money. If you have a registered retirement savings plan (RRSP), the first-time home buyer’s tax credit of $5,000, or a Home Buyers’ Plan (HBP) allows you to withdraw up to $35,000 in a calendar year from your RRSP. Consult a financial advisor or planner to see if these options are right for you.
6. Pick up a Side Hustle
If cutting back on your expenses isn’t quite enough to reach your financial goal in 2020, consider other ways you can boost your income. Working for a ride share service, pet sitting, tutoring, or getting a weekend retail job are all ways that you can save even faster. And remember, it isn’t forever!
The home buying journey can be overwhelming. At Genesis Land our goal is to support you every step of the way, providing helpful advice that will turn your dream home into a reality. Visit Genesisland.com for more information on our trusted builder partners & the communities they build in.
