If you have been planning on making a move towards home ownership, then there are likely to be many thoughts of how to best go about this process currently floating around in your head. Beginning with learning as much as you can about mortgages and interest rates is a good place to start.
Perhaps, even, you have experience dealing with bad credit. With a lower credit score, this can also mean certain differences in how you can go about obtaining a home loan, as well as which terms and rates you can secure. What can also help you to manage your mortgage over time is to prepare ahead of time for the demands of these payments, including how to save up for a down payment.
Here are 5 ways to save up to buy a home, of course starting with your down payment.
1) Open a Savings Account
If you haven’t already done so, the first step towards pooling your down payment funds is to open a savings account. Ideally, it is best to open this account with the existing bank you currently have checking and other credit accounts with. The reasons for this being that it is likely to be easier to transfer funds electronically between these accounts with either a small fee or even without a fee at all.
Overall, this can make your life a bit easier as you don’t have to go into the actual financial institution to do so, as well as saving a bit of money – ultimately not being charged additional fees in the process. An example of a reliable savings account to consider is a Tax Free Savings Account (TFSA). Here you can save all of your down payment money, without worrying about incurring taxes and watch your savings grow.
2) Budget & Spend Less
Once you have established a proper savings account, then you will also need to find a way to spend less money than you have been. Budgeting can be a good method of getting into a good routine for reducing your overall spending. Compiling a list of all of your current expenses, as well as your incoming money – next you can assess how much money you have actually been able to save in the past.
Perhaps, here you are noticing that you have been exceeding your resources in various areas that you could instead cut back on. Ultimately, a budget can help to paint a clearer picture of where your finances stand and just how much you can afford to save towards your down payment each month – chances are you will find your can save a fair bit more than you have already been.
3) Take On Some Additional Work
Thirdly, if your goal is to save up for the purchase of a new home, then in addition to budgeting, spending less and saving a little more – you can also take certain steps that can enable you to earn a bit of extra income each month. If you already have a full time job then it may seem daunting to think about having to take on some additional responsibilities. Fortunately, there are many opportunities these days for part time work that revolve around working online, from anywhere as well as any time of the day.
With that being said, you could pick up some extra income through a position that requires only a little bit more of your time, with flexible hours – such as evening and weekend work from the comfort of your own home. Even with a few extra hundred dollars each month in the bank, these funds can contribute to your down payment and home buying goals.
4) Pay off Debt First and then Save
Although at first you may have to pay off debt and not be able to save initially, once you have paid off a portion of your debt, you will also have more cash coming in – however not always going out.
If you are having trouble paying down your debt however, perhaps then taking out a line of credit at a lower interest rate could help you pay this debt off at a faster rate. For example, with a lot of credit card debt, a consolidation loan could also be an effective method of ridding yourself of some of your debt sooner rather than later.
Either way, with more income at your disposal, you can start saving some of this money towards your down payment, instead of always having to use it to pay off bills.
5) Look into the First Time Homebuyers Program
Lastly, if possible, with the help of a first time homebuyers program, you could also be able to meet your home ownership goals. While this is not necessarily a method of saving for a home in the same way the first few scenarios are, the First Time HomeBuyers Program (FTHB) can however help to facilitate this ultimate goal.
One program for example, that is available to many Ontario First Time home buyers, is the Home Buyers’ Plan (HBP). While there are certain eligibility requirements that must be met in order to access this program, it can enable first time home owners to access up to $25 000 from their RRSPs each year to pay towards buying or building a new home. Ultimately, here you can use some of your other savings to help you move forward with your plans.
In the end, if owning a home is your ultimate goal, then examining your options for saving towards your down payment, and ultimately all of the costs associated with making a large purchase like this is a good way to begin to prepare for this important step.
Additionally, with bad credit you will also want to make sure you can make a sizeable down payment as this can be critical to your success in paying off your mortgage over time.