Canadian Mortgages: 7 Ways to Save For a Home
Buying a house is one of the most expensive decisions any Canadian can make, and saving enough money to achieve this can feel like an uphill battle.
Since the start of the COVID-19 pandemic, there has been significant financial impact on individuals and nations alike. Many Canadians have either been furloughed or made redundant at their workplace, drastically affecting their level of income. Surprisingly, the real estate market has been booming with over 550,000 houses sold last year, according to the Canadian Real Estate Association.
If you’re planning on becoming a homeowner soon, setting some money aside is very important whether or not you intend to apply for a mortgage. Apart from being able to pay for a property outright, a good savings plan would afford you enough money to make a down payment. The general rule is being able to afford at least a 20% down payment for the house you intend to buy. But you can make as low as a 3% down payment depending on your income and credit score — which you can check using a Canadian mortgage calculator.
Once you have determined how much money you require to buy the house, the next step is to start saving up for it. There are various ways to save for a home. Here are some of the most effective strategies that you can employ:
- Building a proper budget
Creating a budget is the first step you need to take towards saving. Without knowing where you spend your money, it’s near impossible to divert some of it towards your savings plan.
To build an effective budget, you need to access your bank statements credit card expenses. Carefully study exactly where your money goes each month, taking note of necessities such as rent, utilities, loan repayments and medical bills, as well as non-essentials like restaurants. The end goal is to find things you can cut back on.
Once you can account for all of your expenditures, create a realistic but fixed budget for every necessity and non-essential, putting aside some money to “pay yourself” each month for your home’s down payment.
- Cut down on expenditures
If you really want to save more money towards your down payment, downsizing is one of the fastest ways to do this. By cutting down on some expenditures, you can divert that money towards your savings plan and achieve your target amount in less time.
Selling your extra vehicles, moving into a smaller and cheaper rented apartment, and reducing your power consumption can easily save you anywhere from a few hundred to thousands of dollars per month. Many people have made a habit of downsizing when saving up for a major purchase. You should give it a try.
- Cut down on certain luxuries
Buying a home is a big financial commitment. To help achieve this, you can reduce your spending on luxuries and bad habits that are costing you a lot of money.
For example, if you are prone to impulse buying every time you go shopping — whether in person or online — you may need to unsubscribe from certain marketing emails and avoid visiting certain stores.
You can equally save a few bucks by cooking some meals at home rather than ordering takeout. Also, on your next flight, you could fly “economy” and save the difference from a first-class ticket for your home’s down payment.
- Requesting a salary increase
It may be possible to ask for a raise at work if you discover your needs are exceeding your ability and efforts to save any money. In Forbes, Senior Contributor Caroline Ceniza-Levine, mentions the importance of timing in asking for a salary increase, and to avoid making such a request during sensitive times.
Gather all of the information you need concerning your performance. During your salary review meeting, support you request by presenting your evidence with confidence. If the timing is right, once you clearly communicate your value to your manager, you stand a good chance of getting an increase in salary.
- Automate your savings
This tip is important, particularly for impulse shoppers. By automating your savings, you authorize your bank to make pre-determined automatic withdrawals from your main account to a secondary savings account every month.
Once your money becomes less accessible, the temptation to spend it on things you don’t need should reduce drastically. This small step can make a huge difference in your mortgage plans.
- Get a side hustle
It’s easier to save more money when you’re earning more monthly income. If you’re a 9-to-5 worker, it might be a good idea to start a side hustle to earn more money — which has become a lot easier in today’s gig economy.
Look through freelancing websites and select a skill or two that you can offer as your gig. For instance, you could offer writing, graphic design, or web development services amongst many others, all on your own schedule and at your own rate. There’s also the option of earning more money through ridesharing companies like Uber and Lyft.
- Rent out your space
If you live alone in a spacious apartment, you may want to consider renting out a spare room. With a roommate, you can split your rental fees and save more by reducing one of your highest recurring monthly expenses.
Airbnb provides a platform where you can turn your apartment into a “short let”, giving you more control over who stays there and for how long.