Planning and saving for the down payment

Make sure that you’re ready

No one expects to go from couch potato to marathon runner overnight. Similarly, don’t expect to go from pay cheque-to-pay cheque to down payment in hand with a snap of the fingers. There are some preliminary steps in building up to the kind of financial security buying a home requires.

Have you mastered budgeting? Do you track your expenses? If you have that down, the next thing to get in order is an emergency fund of three to six months of expenses. That way, any unplanned expenses (car trouble, medical bills, etc.) won’t disrupt your saving toward a down payment. You’ll also want to clean up any other debts you may have. Trying to take on the substantial debt of a mortgage, with credit card debt, student loan debt and a car payment hanging over your head is asking for trouble. Take some time to get your existing debt to a minimum, preferably zero, before you look to add to your plate.

Set a clear savings goal

If you’ve mastered the financial security basics above, it’s time to advance to the next stage, setting your savings goal. Your down payment will be between 5 and 10 percent of the cost of the property. The oft-overlooked closing fees are also something to keep in mind at 10 to 15 percent of the mortgage amount. You’ll need to pay fees before you can close on the house. To nail down these figures you’ll need to have a sense of what you can afford. There are a couple different ways to go about calculating this, but it can be complicated to do by hand. NCB’s mortgage calculator at myhome.jncb.com can be useful in this regard.

Determine your timeframe

Once you have a goal, it’s time to figure out how you’ll meet it. Your timeframe will determine how much you need to save each month. For example, if you plan on buying a ten million dollar home in two years, you’ll need to have one million for a 10% deposit

Make room in your budget

There are two ways to go about this. You can aim to earn more by taking on a side hustle, and/or you can spend less. Tighten your belt by limiting eating out to special occasions, bringing lunch to work instead of ordering take out, trimming your clothing budget, or cutting out luxuries like cable T.V. and fancy gym memberships. Also consider directing any periodic windfalls—a large commission, annual bonus, or proceeds from the sale of personal assets—to your savings account. Finally, put off major expenses like a new car or fancy vacation. It will be a sacrifice, but it’ll all be worth it when you’re turning your own key to your own house.

• Copy link
• X
• Facebook
• LinkedIn