Renting and saving money for a mortgage may seem like a daunting task. How are you supposed to save up for a down payment for your first home if you have monthly rent to pay? Actually, it’s quite easy. However, you will have to make small sacrifices to put away enough money to purchase your first property and be eligible for a mortgage.
Pay off your credit cards first
This is the most important thing you will do to save for a mortgage when renting. If you have revolving debt (credit cards, line of credit), paying these off should be your first priority. Start with the card that has the highest interest rate and work your way down. It’s hard to save money when you have debt. Plus, you won’t be able to qualify for a mortgage if you have too much debt. Once you’ve paid off your credit cards, you’ll be able to save money easily.
Open a TFSA
Tax Free Savings Accounts (TFSA) allow you to save money easily because your money is allowed to grow tax free in this account. You don’t have to pay income tax on the money you put in this account and can withdraw it whenever you please to use as a down payment towards the purchase of your first home.
Take advantage of your RRSP
If you have an Registered Retirement Savings Plan (RRSP) you can withdraw up to $25,000 from it to contribute to the down payment of your first home. You have 15 years to pay back the money otherwise it becomes taxable.
Look into first-time homebuyers programs
The federal and provincial government have certain grants and rebates available for first-time homebuyers. The purpose of these programs is to help people afford their first home. Depending on where you live and if you meet certain requirements, you could be eligible for a land transfer tax rebate, first-time homebuyers tax credit or a GST/HST new housing rebate.
Cut the excess
There are things we all do but don’t realize that are a drain on our bank account. To save money for a mortgage while renting, cutting the excess is imperative. Here’s how:
Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).
Everyone who is looking to purchase a home will need a mortgage. But, what is a mortgage exactly and why do you need it? Besides being the term to describe a loan secured by real estate, a mortgage allows you to access funding to procure your dream home.
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