At Avi Urban, we work with some great experts to help explain all of the details around owning a new home. We recently checked in with Laura Parsons, Bank of Montreal Manger of Mortgage Specialists and Calgary Sun Columnist, to give you some tips on saving for that downpayment.
Lately I’ve been having conversations with homeowners, asking “Why are you still renting?” It quickly becomes apparent that people are still having trouble saving for a downpayment. The minimum 5% downpayment on a purchase price of $300,000 is $15,000, so this is understandable.
Here are some things to consider when determining what you can afford and saving for a downpayment:
They key is to understand your monthly budget. If you’re a Bank of Montreal customer, you can use tools like BMO MoneyLogic, available online, to determine how you’re spending money. You can also take some time and make a list of how you are spending your hard-earned cash.
Next, create a savings plan. Once you have an idea as to where your money is going, you can make some decisions on aspects of your spending that can be potentially cut out or reduced. This way, you can put more of your money into savings. You can also set up a continuous savings plan, where each pay period you have a defined amount of money coming off your paycheque and deposited into your new savings account. The trick is to make sure this account is not easily accessed.
You can also irect your savings into an RRSP, instead of a savings account. This will provide you with tax deduction that can lessen the amount of income tax you pay, or result in a tax refund (depending on your tax situation). Once you have an RRSP, if you haven’t owned a primary residence for the past five years, you may qualify for Canada REvnue Agency’s Home Buyer’s Program. Through this program, you can withdraw up to $25,000 from your RRSP to use for a downpayment.
Discuss your goal of saving with your family, and you can even suggect they contribute to your downpayment savings for special occasions.
Get everyone excited about your plan, including your banker! Working with a mortgage specialist will help you to plan how you achieve your downpayment goal. We had one client who worked with our team from concept to move-in, helping them plan their finances in order to own a new home!
Laura Parsons is an area manager of mortgage specialists at BMO Bank of Montreal. If you have a question about home financing, reach her at email@example.com.