Creative Ways to Save for Your Down Payment

In a real estate market like Toronto’s, the thought of buying a home may feel overwhelming and saving up for a down payment can be stressful. But with a realistic perspective, some patience and a bit of discipline, it’s still possible to gather enough money to purchase a property you love.

Let’s look at how much money you’ll need to put down, based on the home’s purchase price.

• Up to $500,000: Minimum 5%
• Between $500,000 - $999,999: Minimum 10% on the portion over $500,000
• $1M and up: Minimum 20% on entire purchase price

Anyone putting less than 20% down will also have to pay mortgage insurance, which is provided by the Canada Mortgage and Housing Corporation (CMHC). Your insurance premiums will be highest if you’re only putting down 5%.

Aside from winning the lottery, the truth is that most homebuyers will have to make some sacrifices in order to save up for a solid down payment. The following list has suggestions on how to do this, from the most modest to the most aggressive. But as with anything in life — the more daring the method, the bigger the payoff tends to be.

Modest Commitment, Modest Payoff

Stop the small purchases

That Grande Caramel Macchiato may not seem pricey in the moment. But add those up 5 days a week over 52 weeks a year, and you’ll see that’s a good chunk of cash you could’ve spent on your down payment. When you’re trying to save up for something big, all those little things add up. Instead of buying coffees each day, get a coffeemaker and make your own at home. If that doesn’t sound appealing, then try limiting your coffee shop visits to once a week. Same goes for books. Instead of buying new ones, borrow them from the library instead.

Cancel subscriptions

Do you really need that Netflix, Disney + or Spotify Premium subscription? If the answer is yes, that’s okay. But at the very minimum, determine how many monthly subscriptions you’re actually paying for and cancel the ones you seldom use.

Automate your savings

Set up your bank account so that a portion of your paycheques are automatically diverted to savings. Not sure how much money to divert each month? Well for starters, the money you’re no longer spending on coffees and neglected subscriptions can now be funneled to your down payment fund.

Take advantage of your TFSA

If you’re over 18 with a valid social insurance number, the government allows you to open a Tax-Free Savings Account (TFSA). Any interest you earn in this type of account is 100% not taxed. Just remember there’s a maximum amount of money you can contribute each year. So before making large deposits, check with your bank first.

Moderate Commitment, Moderate Payoff

Begin a side hustle

No doubt your day job may be stressful, so the thought of taking on anything else may seem unreasonable. That’s why this suggestion may not be for everyone. But if there’s something you’re good at or enjoy doing, can you monetize it? Maybe there’s an opportunity to sell your artwork, or even your delicious pastries. There are also lots of easy side jobs out there, such as cat-sitting or dog-walking.

Consider all the time you spend after work scrolling through social media or texting with friends. It may seem like just a few minutes here or there. But these activities are likely adding up to hours per week, which could be better spent on making extra money.

Change the way you get around

This one may feel like a bigger commitment because it involves a major lifestyle change. But if you have two cars, consider going down to one. If you already have one vehicle, switch to biking or walking (if it's geographically feasible). You’ll not only save on gas and insurance, but you won’t have to pay for parking. And if you own a parking spot, you can even rent it out to someone else.

Large Commitment, Large Payoff

Rent out an extra room

Do you have a spare bedroom you’ve been using as an entertainment den or home gym? If you can sacrifice that space and rent it out to a roommate, that’s a good chunk of passive income right there.

Downsize

Splurging on that larger apartment may have seemed like a good idea when you weren’t saving up to buy a home. But now that your priorities have shifted, consider if you really need all that space. Moving to a smaller apartment can save you thousands on rent each year. And if the thought of downsizing makes you cringe, remember it’s only temporary. After all, your ultimate goal is to purchase a home. To maximize savings even further, see if you can live rent-free with your family for a short period.

I hope these suggestions have been helpful! If you’d like to learn more, reach out anytime for a no-obligation discussion about your property search.

You can call me at 647-501-9263 or send an email to andrew.brunner@strata.ca. I’m always happy to help!