Nov. 29, 2011, 6 a.m. by SMARTBRIDE
3 Tips to Help You Save for Your First Home
After the wedding comes the down payment.......
The wedding’s over, and hopefully you’ve managed to recoup some of your costs by selling your wedding dress and accessories with us on SmartBrideBoutique.com. Now it’s time to crack down on the other big outlay that is likely fast approaching: a home for your new family!
So, how do you get started?
Our friends over at RateHub.ca have outlined 3 steps to get you on the right path to home ownership. It’s a combination of smart saving – learned from your days as a budgeting bride-to-be – and shopping around for the best mortgage rates.
Find out these 3 steps below!
Step 1: Figure out How Much you Need
Let’s say you managed to keep your budget in line and your bridal gown expenditure close to the national average cost of $1,800. Let’s also assume you’ve managed to recover roughly 50% by selling your dress and some other items on SmartBride. This means you need about $1000 less for your down payment. YEAH!
- Given that the average Canadian home price (MLS September 2011 is $353,600 and the minimum down payment in Canada is 5% ($17,600), with your smart bride sensibilities, you now need to save $17,600 - $1,000 = $16,600.
- Start saving a fixed portion of every paycheque and consider putting your savings to work in some money-growing instruments.
- Make regular contributions to an RRSP account. Canada’s RRSP Home Buyers Plan (HBP) allows first-time home buyers to withdraw up to $25,000 (each!) tax-free from RRSPs for a home purchase. This means that your contributions get reduced from your taxable income and you can put those tax savings back in to the RRSP for your down payment.
- Consider GICs or Canada Savings Bonds. These offer relatively low return but also low risk. Another option is Real Estate Investment Trusts (REITs), which follow the real estate market and, in theory, should also follow the size of your needed down payment.
Remember, this is only an estimate and will vary depending on your city and also what you can qualify for given your combined household income.
Step 2: Start Saving
The first thing you need to do is manage your expectations, especially if you went all out on your wedding. Few first-time buyers can afford their ‘dream home’ right away, and must set their sights on a starter home. Unlike marriage, you are not bound to this property for life (unless you’re Kim Kardashian, of course). You can upgrade as your incomes rise and family grows.
Besides the minimum 5% down payment, you ‘ll also to pony up an additional 1.5-4% for closing costs such as Land Transfer Taxes and legal fees, not to mention the funds required to furnish your home.
To get your saving started, considering these options:
Remember, your down payment affects the home you can afford, the size of your mortgage and your monthly mortgage payments.
Step 3: Shop Around for the Best Rates
When you’ve saved enough and the time comes to apply for a mortgage, it cannot be stressed enough how important it is to shop around and compare mortgage rates. Why stop saving at the wedding? Just as you shopped around for your wedding vendors to find the best fit and value, comparing mortgage rates presents an opportunity to save thousands of dollars!
The good habits you picked up as budgeting bride can get you the best bang for your buck with your home purchase too.