Tips To Increase Your Down Payment
January 26, 2016
Saving up a down payment for your first home can be difficult.
We have some tips to help you further pad that bank account and declutter your life while you are at it!
Set up a regular automatic savings plan.
If you analyze your personal budget, you’ll likely find a few areas where you can reduce your expenses. Once you’ve decided how much you can spare from your monthly budget, set up an automatic transfer into a savings account for your home-buying needs. Schedule your transfer as close as possible to payday to eliminate the urge to spend it.
Borrow from your RRSP
Take advantage of the RRSP Home Buyers’ Plan (HBP) which lets first-time homebuyers withdraw up to $25,000 from your Registered Retirement Savings Plans for a home purchase, tax-free. You have up to 15 years to repay the amount used, so for each year of your repayment period, you have to repay 1/15th of the total amount withdrawn. Check with your financial advisor to see if this option is right for you.
Tax-Free Savings Account
Withdrawing all or part of your down payment from your TFSA does not incur any tax nor penalties. You can take money out of your TFSA at any time and pay it back if and when you want, subject to certain restrictions. It’s quick and simple to withdraw from your TFSA
Home Equity Line of Credit
If you are looking to purchase a second home or investment property, you can borrow money from a home equity line of credit. This option exists if your income and debt support repayment of the line of credit as well as the other monthly carrying costs (taxes, insurance, other fees)
If you are fortunate enough, family gift and inheritances are another common source for first-time buyers’ down payment. Your lender will generally require written confirmation that the gift does not need to be re-paid.
Some of your down payment cash could be sitting right in front of you. Do you need the 2nd car or the bike that never gets used? You might be amazed at how much extra cash you really having sitting around.