Planning to buy a home? How much should you save to buy it? In this episode, we discuss how much to save for a down payment, programs to help you save and when you should start, especially as a first time home buyer.
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Hi everyone, and welcome to another edition of Home Buyer School.I'm joined by Troy Champ, a Mortgage Advisor with Mortgage Tree.
Today, the topic that we're looking to discuss is saving for a down payment on a house.
So, for the first question, [00:00:30] Troy, is:
How much should I save on a down payment for a house?
The minimum down payment on a house is 5% of the purchase price, if your purchase price is under $500,000.00.
The best way to start saving for that is just with your personal savings. If you don't have any money there, a great way to do it is through your RSPs.
You're allowed to use your RSPs as a first time home buyer.
The nice thing about investing money into your RSPs is you get money back when you do your income taxes, which you can then reinvest into your RSPs to increase the [00:01:00] amount of your total down payment.
Karl Yeh: Is there any other ways, besides an RSP, to save?
You can save through TFSAs, your personal savings account.
Sometimes the bank will even allow you to borrow some of your down payment.
Karl Yeh: Oh, okay.
When should I start saving for a down payment on a house?
It's never too early to start saving.
It does take quite a while to save up 5%, and I can say that if you are short, there are a few programs out there called a Flex Down Mortgage, where [00:01:30] you're able to borrow a portion, or all of your down payment, as long as your credit meets their minimum requirements, and that you can service that loan payment.
When you're looking at the flex down payment, is that paid through the course of your mortgage?
It's a separate loan for the Flex Down Mortgage.
The loan for the down payment is completely outside of the mortgage, and you're just taking a personal loan and using that towards the short fall on your down payment.
Great. Is there any other things you want to add, in terms of saving [00:02:00] for down payments?
It's easiest to save monthly. I think if you set monthly goals, that's going to make it much more attainable rather than if you have a yearly goal.
For a first time home buyer, is this something that they should be saving years out in advance?
Yeah, it's going to take a few years to save when you're looking at the average home in Calgary being over $400,000.00. It takes quite a while to save up that $20,000.00.
The earlier you start, the better off it is.
Karl Yeh: Awesome. Thank you very much for the information.
Troy Champ: You're welcome.
Karl Yeh: Thank you for joining us, and we'll catch you next time.
So of our other videos that you may be interested in watching related to this topic are:
Let us know if you have additional down payment or home buying questions that we can answer by submitting them in the comments section below.
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About Troy Champ:
Troy is one of those uniquely capable mortgage experts who has refined his craft over 17 years of experience with two of Canada’s major financial institutions and then one of the largest mortgage brokerage firms in Western Canada. He is amongst a rare group of professionals who have funded over $500 million in mortgages over his career and received many top level awards for excellence.
A hallmark of Troy’s service pledge is unparalleled availability. While many will say they provide great service, Troy proves it day in day out without question. His clients are never left waiting for answers to their enquiries. Quite simply, his clients are thrilled to work with someone who says what they do and does what they say.