Saving for a Down Payment on a Home
Since the changes in the mortgage regulations came into effect last spring in Canada saving for a down payment is more important than ever. A down payment is the money you put toward the price of a home. Finding the down payment can be a difficult task, especially for young first time homeowners. If you are currently looking to buy a home, below are a number of tips to saving for the down payment.
Determine When You Want to Buy a Home: It is important to determine when you would like to buy a new home, such as in 5 to 10 years, or in the next 2 years or so. This will help you make the right investments to help you save for the down payment. For instance, for people who want to buy a home in the next couple of years, they may want to make short term investments that will ensure their capital in preserved and there will be less chances of the investment fluctuating in value. A short term investment can include: Mutual Funds, Term Investments, and A Premium Rate Savings account.
Safe Ways to Grow your Money: It is important not to make high risk investments as a way to save for a down payment. If you are a first-time buyer, you could save for a down payment in a Registered Retirement Savings Plan (RRSP). Under the government’ Home Buyer’s Plan, you can take up to $20,000 from your RRSP and put it as a down payment on your first home. You will not pay any tax on the money as long as you pay it back over the next 15 years. Other safe ways to invest safely is through a high-interest savings account, Guaranteed Investment Certificate (GIC), and Canada Savings Bond (CSB). The Federal government offers CSBs at specific times each year. They pay a minimum interest rate and you can invest as little as $100. In addition, some provinces offer provincial savings bonds.
Don’t Go into Debt: To get a mortgage, you need a solid credit rating so you need to stay out of debt. You can do this by making sure you maintain your credit cards properly by not overcharging and failing to make your payments. As well, always pay your bills on time.
It can take time to save up enough money for a down payment. You can speed up the process if you invest your money so it will grow. Just don’t take make high risk investments and be fiscally responsible when managing your own finances.
Consolidated Credit Counselling Services of Canada, Inc. teaches consumers how to budget, get out of debt, and use credit wisely. Offers a variety of unbiased debt management services and alternatives to help people get their debts under contro.