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Saving up for Your Dream Home

Jackson Middleton • June 5, 2018

If you’re just starting out on a journey of homeownership, the prospect of coming up with a hefty down payment can bring that trip to a quick halt.

Whether you’re a young person starting out in adult life, or your income has stalled for years, putting together a five or even six-figure down payment on a home can seem virtually impossible. And while it isn’t easy with all the other costs in life, it is possible but it does take some discipline.

Mortgage brokers have seen it all. We’ve had clients living in big homes and driving fancy cars, only to find out they have nothing in their savings. On the other hand, we’ve seen clients making a below average salary with six figures in their bank accounts because they’ve been disciplined in saving over many years.

So it really depends on the person.

Regardless of what you earn, put aside 10 per cent of what you get paid. While that sounds nice, you might be wondering how that’s even possible, especially if you’re not used to saving. I’d recommend having that money put aside in an automated way. All the banks offer services that can help you force save.

Though it might feel painful at first, after a couple months you’ll get used to it and you won’t miss the extra money at all.

If you’re a saver, you’re eventually going to get where you need to be, maybe not as quickly as you’d like but if you’re a spender then you’ll likely be on treadmill to nowhere.

At the end of the day, when you get in the true habit of saving, it’s amazing how quickly that will compound and how quickly you can save a lot of money.

Now that you’re on track to save, there is another aspect you need to know about your down payment.

While this might sound contrary to conventional wisdom, a bigger down payment isn’t necessarily better, or the goal.

Sure, if you have no debt at all, put as much down as you can.

But most of us have some debt, and many of us are carrying a lot of debt and paying out hundreds of dollars a month to keep the bill collector away. You are better off putting less down and using the rest to pay off your consumer debt.

Keep in mind, every $400 in monthly payments roughly translates into $100,000 of purchasing power on a mortgage. If you can get rid of existing consumer debt, you’ll qualify for the larger amount you’re looking for without having larger down payment.


This articles was originally published as part of the Dominion Lending Centres newsletter, but we liked it, so we published it on our blog as well. If you’d like personalized advice, any one of our Canadian Mortgage Experts would love to talk with you.

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RRSP As A Downpayment

By DLC Canadian Mortgage Experts • December 28, 2022
Did you know there’s a program that allows you to use your RRSP to help come up with your downpayment to buy a home? It’s called the Home Buyer’s Plan (or HBP for short), and it’s made possible by the government of Canada. While the program is pretty straightforward, there are a few things you need to know. Your first home (with some exceptions) To qualify, you need to be buying your first home. However, when you look into the fine print, you find that technically, you must not have owned a home in the last four years or have lived in a house that your spouse owned in the previous four years. Another exception is for those with a disability or those helping someone with a disability. In this case, you can withdraw from an RRSP for a home purchase at any time. You have to pay back the RRSP You have 15 years to pay back the RRSP, and you start the second year after the withdrawal. While you won’t pay any tax on this particular withdrawal, it does come with some conditions. You’ll have to pay back the total amount you withdrew over 15 years. The CRA will send you an HBP Statement of Account every year to advise how much you owe the RRSP that year. Your repayments will not count as contributions as you’ve already received the tax break from those funds. Access to funds The funds you withdraw from the RRSP must have been there for at least 90 days. You can still technically withdraw the money from your RRSP and use it for your down-payment, but it won’t be tax-deductible and won’t be part of the HBP. You can access up to $35,000 individually or $70,00 per couple through the HBP. Please connect anytime if you’d like to know more about the HBP and how it could work for you as you plan your downpayment. It would be a pleasure to work with you.

Is There A Difference Between A Deposit And Downpayment

By DLC Canadian Mortgage Experts • December 21, 2022
If you’re new to the home buying process, it’s easy to get confused by some of the terms used. The purpose of this article is to clear up any confusion between the deposit and downpayment. What is a deposit? The deposit is the money included with a purchase contract as a sign of good faith when you offer to purchase a property. It’s the “consideration” that helps make up the contract and binds you to the agreement. Typically, you include a certified cheque or a bank draft that your real estate brokerage holds while negotiations are finalized when you offer to purchase a property. If your offer is accepted, your deposit is held in your Realtor’s trust account. If your offer is accepted and you commit to buying the property, your deposit is transferred to the lawyer’s trust account and included in your downpayment. If you aren’t able to reach an agreement, the deposit is refunded to you. However, if you commit to buying the property and don’t complete the transaction, your deposit could be forfeit to the seller. Your deposit goes ahead of the downpayment but makes up part of the downpayment. The amount you put forward as a deposit when negotiating the terms of a purchase contract is arbitrary, meaning there is no predefined or standard amount. Instead, it’s best to discuss this with your real estate professional as your deposit can be a negotiating factor in and of itself. A larger deposit may give you a better chance of having your offer accepted in a competitive situation. It also puts you on the hook for more if something changes down the line and you cannot complete the purchase. What is a downpayment? Your downpayment refers to the initial payment you make when buying a property through mortgage financing. In Canada, the minimum downpayment amount is 5%, as lenders can only lend up to 95% of the property’s value. Securing mortgage financing with anything less than 20% down is only made possible through mortgage default insurance. You can source your downpayment from your resources, the sale of a property, an RRSP, a gift from a family member, or borrowed funds. Example scenario Let’s say that you are looking to purchase a property worth $400k. You’re planning on making a downpayment of 10% or $40k. When you make the initial offer to buy the property, you put forward $10k as a deposit your real estate brokerage holds in their trust account. If everything checks out with the home inspection and you’re satisfied with financing, you can remove all conditions. Your $10k deposit is transferred to the lawyer’s trust account, where will add the remaining $30k for the downpayment. With your $40k downpayment made, once you sign the mortgage documents and cover the legal and closing costs, the lender will forward the remaining 90% in the form of a mortgage registered to your title, and you have officially purchased the property! If you have any questions about the difference between the deposit and the downpayment or any other mortgage terms, please connect anytime. It would be a pleasure to work with you.
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