How To Save for Your First Home Down Payment
Rising home prices in Canada used to be a huge deterrent for new house hunters. After all, how could you own a house if you couldn’t even afford a down payment?
An industry survey of over 1,500 Canadians revealed that almost 70% of them cited upfront payments as the main roadblock for home ownership.
Thankfully, this doesn’t have to be the case. There are paths toward home ownership that may work for you.
If you’re looking for residential real estate in Toronto, there are two ways to save money on your first home down payment.
1. Learn More About First-Time Home Buyer Programs
Due diligence for your first home purchase not only involves finding the best property or crunching the numbers.
It also requires you to learn more about funding assistance for first-time buyers. The Canada Mortgage and Housing Corporation’s First-Time Home Buyer Incentive is an example.
The program provides first-time buyers with up to 10% of a home’s purchase price to be used for a down payment.
You can also withdraw funds from your Registered Retirement Savings Plan (RRSP) through the Home Buyers’ Plan, but there are some drawbacks to this strategy For instance, you can’t withdraw more than $35,000 for each RRSP under your name. In other words, you’ll still need other funding sources to settle your first down payment.
2. Use a Mortgage Payment Calculator
A mortgage payment calculator allows you to determine just how much you’ll need to spend on a home purchase.
Let’s say you plan to buy a house with a property value of $1,045,500. This is the average price of residential real estate in Toronto, according to the Toronto Regional Real Estate Board.
You’ll need to pay $209,100 as the down payment for the house, plus $1,500 for a lawyer’s fee and title insurance.
If the property is a non-condominium type, the National Bank of Canada (NBC) says that your household annual income must be at least $178,500 to afford it.
By using a mortgage payment calculator, it’s easier to figure out how much you’ll need to save to put a down payment on real estate in Toronto.
The Take Away
First-time home buyer programs and mortgage calculators can only do so much to help you save on a down payment.
Your annual income remains a primary factor for a purchase decision. How much are you willing to spend on a down payment for residential real estate in Toronto?