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Mortgage Blog Helpful hints on how to save for a down payment to buy a home

Author: The Mortgage Girl |

As a mortgage broker for the last 15 years and 20 years before that as a banker, I have heard from many people over the years who say they are tired of renting. A common statement is “I can easily make a mortgage payment because I am paying at least that amount in rent but I don’t yet have the down payment”. These days, in an economy of uncertainty, for some, it is often a struggle to meet ones monthly financial obligations, so where can additional funds come from for a down payment on a home purchase?

Read on…… I have some ideas

Let’s first discuss what a down payment is. A down payment is the amount of money you spend upfront to purchase a home and it is combined with a mortgage to meet the total purchase price of a home. When buying an existing home and not a new build, the down payment is not usually required to be on hand until about 3 weeks before the move in date. However, do be aware an initial refundable deposit is often required at the time you write the offer. This amount will be at least a few thousand dollars which would then form part of the down payment. In addition to the down payment funds, depending on what province you are buying in, you will require additional funds for closing costs such as legal fees, any property taxes adjustments and in some cases, land transfer tax.

Next step is to determine exactly how much money you have to save. Whether you are a first-time homebuyer or purchasing your 5th home, the minimum down payment required to purchase an owner – occupied home valued at less than $500,000 in Canada is 5% of the purchase price. This down payment amount is of course subject to qualifications as some financial situations may result in a larger down payment requirement. Due to a number of recent significant changes to mortgage qualifying rules, if you are unsure of where you stand, I strongly suggest you contact a mortgage specialist. They can determine exactly how much of a mortgage you can qualify for as it will likely be somewhat less than what you would have qualified for a year or so ago. Once you have determined how much money needs to be saved, you then need to decide what a realistic timeframe is for a home purchase. Naturally, the shorter your timeframe is, the higher your annual savings goal will be.

There are numerous information pieces and articles available everywhere and anywhere on how to make a budget, how to save money on groceries, utilities and car insurance, however, if you haven’t followed any of that advice to date, not sure if you will do it now. Unless you’re a saver by nature, and most of us aren’t, I suggest you automate the savings process. That will mean some sort of payroll savings plan. You should allocate a certain percentage or dollar amount of your regular pay to go directly into a savings account or money market account dedicated to accumulating the funds for your down payment.

The reason why I like this method of savings the best is because the majority of people I speak to about buying their first home have good credit. This means they are good at paying bills but find it difficult to save money. I say think of saving money from each pay cheque as simply paying another bill.

Another idea to make the process of saving money for a down payment on a house easier, or even shorten the process is by banking income-tax refunds, gifts received, bonuses or large commission checks, or even the sale of personal assets.

Whatever the size of your down payment, it is important to build flexibility into your savings plan. While you’re saving up money, there’ll be other demands on your finances. These can include major car repairs, replacement of a car or uncovered medical expenses. These unexpected costs will not magically stop just because you have a goal of saving money for a down payment on a house. You’ll have to be ready when they happen.

Make sure you have an emergency fund—before you even start saving for your down payment—and keep it well-stocked.

Trying to save money for a house down payment is a big undertaking. In fact, it’s the largest debt that most families will take on in their lifetime. It’s important to deliberately make small changes (like those above) that will add up to huge savings over the lifetime of your mortgage.

After reading this contact the MortgageGirlca. Former banker turned #MortgageBroker. Put her over 35 years of experience to work for you. #Benefitfromexperience Contact her via phone: 780-433-8412 Email: Facebook ( Twitter (mortgagegirlca) or read more of her blogs at (