Based on my last blog, you should have a rough idea of what you can afford. Now can you save the required down payment to purchase your first house? Boosting your savings rate from 10% to 15% of your gross family income will give you a better chance of achieving your goal.
Don’t forget about closing costs! Multiply 3% of the house price for lawyer fees, house insurance, title insurance and land transfer tax. Depending on your closing date you may need to pay some pre-paid expenses like property taxes.
To reach your savings goal, I strongly recommend a forced saving plan. Allocate a set amount of your weekly or bi-weekly pay check into a RRSP to take advantage of the first time “Home Buyers’ Plan”!
- Tax free personal withdrawal of $25,000 ($50,000 per couple)
- Interest free loan
- Refunds can be added to your saving plan
- You have 15 years to repay the withdrawals
- Income on investments grows tax free
- No withholding tax on withdrawals
- Your retirement plan will lose income
- A missed repayment will be added to your income
- Must make an annual repayment of 1/15 of the withdrawal
Check out the CRA web site to see if you qualify as a first time home buyer. Plus have a good look at their withdrawal and pay back conditions. Contributing $50,000 over time into RRSPs could result in adding another $10,000 to $15,000 to your down payment.
Saving for a down payment can be reachable. It would only take three years to save $25,000 by transferring $700 a month into your RRSP. Save the refund and a couple could have $65,000 for a down payment.
Don’t wait to find your soul mate, start saving now, so that you and your soul mate will have someplace to live.