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3 Tips For Saving Up A Down Payment


Canada is unique among many other countries as we have one of the highest rates of homeownership in the world, with nearly 70% of Canadians owning their home. The remaining 30% are renting either social housing or private homes and condos. In many European countries, the rate of homeownership is between 50 – 65%.

Why is homeownership so high here? Partly cultural and partly economic. Many Canadians believe that renting is throwing away money or paying the landlord’s mortgage rather than your own, and they look down on those who rent.

On the other hand, there are socioeconomic reasons for limited rental availability and high cost of living. Vacancy rates are low in major cities, pushing up rental prices, and many of the best areas are also mostly owner-occupied.

Even with strong tenant protections, it’s still possible to get “renovicted” by your landlord at basically any time, forcing you onto the street with very little notice. Combined with limited control over how you renovate or even decorate your home, it’s no surprise that most Canadians prefer owning.

Plus, there’s the benefit of having access to home equity, which you can use to get large loans quickly and cheaply. Home equity loan rates are much cheaper than personal loan rates because they’re secured against your home. That allows the lender to easily make their money back if you aren’t able to make your payments (by forcing you to sell your home).

There’s also the satisfaction and privacy that you get when you own your home. You can do whatever you want (nearly) and no one can tell you what to do inside your home (most of the time).

If you want to join the ranks of homeowners, then you’ll have some work to do. The most important thing you can do to improve your chances of getting pre-approved for a mortgage is to build up a down payment. That’s why we gathered some tips to help make it easier to build up a sizable down payment.


1. Start a savings snowball

The debt snowball is a very well-known method of debt elimination, started by Dave Ramsay. In essence, you start by paying down one debt as fast as possible. When that is paid off, you use the same payment you were putting towards that debt towards your next debt. This way, your monthly payments don’t change (you’re using the same amount of money per month) but you quickly pay off one debt at a time.

A savings snowball is similar, except you’re paying yourself instead of a creditor. You start by saving something small, like $5 a week, or even a month. You find this money to save by cutting corners somewhere else in your usual spending. Many blogs suggest cutting out one Starbucks coffee a month, but I think that’s terrible advice. It’s better to find ways to save money on things you don’t care about, like your brand of laundry soap or walking to the grocery store instead of driving, if possible.

Next week, you try to find another place to cut $5 to add to your snowball. Perhaps you buy store brand cereals instead of name brand, or turn up your thermostat one degree in the summer.

You keep repeating this process until you’re saving $20, $30, or even more a week. Soon, this level of saving will become habit – you won’t even need to think about it!

2. Set up automatic transfers to savings

This works best for people with regular paycheques deposited via direct deposit, as you know exactly when you’re getting paid, and how much money you’ll have. People that get paid irregularly, such as commission-only or part-time workers, may not find this useful.

The idea behind automatic transfers is that you can’t miss money that you never see. By setting up automatic transfers to come out the same day you get paid, you get used to having less money. In other words, you have less money to waste. And because you don’t see it, you don’t feel the pain that comes with putting money away.

Nearly every bank with an online presence will let you set up scheduled, recurring transfers to automate your savings. Set these up on the same day that you get paid.


3. Get the best high-interest savings account

Saving money is key to building a down payment, but you don’t want to shove $100 bills into your mattress.

You want to be sure that you’re putting this money into a recognized institution’s bank account so that there’s a trail to your money. When getting a mortgage, lenders will ask for bank statements to prove that you have enough money for a down payment, and they’ll want to see that the money has been in your account for at least 90 days.

But the best high-interest savings accounts also give you interest on your savings, which will help boost your down payment. Savings accounts can often hover around 1% or even less, but high-interest savings accounts give much more. And one of the best high-interest savings accounts in Canada right now is offered by EQ Bank.

The EQ Bank Savings Plus Account currently offers an everyday interest rate of 2.30%* on all deposits, which will accelerate your savings. The more you save, the more you’ll earn. With $10,000 deposited, you could earn $232.44 after 1 year at the current rate!

*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice

With free unlimited Interac e-Transfers®, it’s easy to move your money around where you need it. You can’t withdraw cash directly from your EQ Savings Plus Account, but since Interac e-Transfers® are almost instant you can simply move it to another chequing account for withdrawal.


In Conclusion

There’s no magic bullet to building a down payment. It’s the result of years of good savings habits. You may not be lucky enough to get a large down payment gift, so you have to start working towards your goal as soon as possible.

These tips aren’t fast, but they’re realistic and simple. By incorporating these into your daily/weekly/monthly finance routine, you’ll be able to reliably build your down payment!



Chris Chris 07/18/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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