Saving For A Down Payment: 3 Tips to Get You Started

By Sheila Walkington

When it comes right down to it there are a lot of good financial reasons to buy a home. Not only do you build up equity every month by paying down your mortgage, but also having a mortgage free home in retirement is one of the best financial plans anyone can make. And there are a lot of very real emotional reasons why people want to own too, like wanting roots and a place that is all your own.

But, does it still make sense to buy a home? In Vancouver, prices have gone up considerably over the last 5 years. You might think that would be a deterrent, but our record low interest rates still prove to be a serious enticement to buy real estate. And, what other investment can demonstrate such a high tax free return on investment and give you shelter from the rain in the colour scheme of your choice?

There is no doubt, be it a condo apartment, a townhouse, a carriage house or a bungalow with a white picket fence, it’s a BIG investment. And it can feel like an overwhelming endeavor. It is important to remember that buying a home, particularly if it is your first, is actually the last thing you want to do – sequentially speaking. The first step is dreaming, then goal setting, followed by researching, and of course saving.

David Bach, author of Start Late, Finish Rich has a great story that illustrates the journey one man took to buy his first home. The story begins with the man giving all sorts of excuses as to why he couldn’t possibly buy a home: in debt, wife having a baby, etc. But, David challenged him and said, “What if you absolutely had to buy a house in 18 months – what would you do?” The man thought about it for a minute and said, “I guess we could move in with my wife’s dad, pay down our debt and start saving for a down payment.” As he was talking, he starting thinking, “Hey we could do that!” And so they did. Two years later they achieved what they thought was unimaginable. In reality, it was the minute the man let himself imagine it was possible that it all came together.

Moving in with your family or getting married to be able to afford a house may not be the answers that work for you, so start to think about what solutions will work for YOU. Here are some tips to get you started on the path to home ownership.

3 Tips to Get Ready to Buy

1. Set a goal: The trick is to make sure your goal is true to your heart and achievable. Something like ”I want to buy a condo in the Mount Pleasant area by Spring 2011”.

2. Make a Plan: A plan is a list of action steps you need to take to make your goal happen. For example:

· Pay down debt by December 2011

· Save enough for a 10% deposit by Spring 2012

· Make a list of priorities you want in a home (i.e. balcony, near transit, fireplace, den, etc)

· Ask for raise at work at the next review

3. Start Saving: Pretend you own a home now. If your current rent is $1,000, and you figure your mortgage., maintenance costs and property taxes would be $1,650 per month if you owned a home, then start to set aside $650 into a savings account each month to cover your “pretend” condo fees, maintenance costs, taxes etc.

If it feels too tight, that’s a very real indication that you need to make some adjustments to your spending – and you’ll know this long before you’ve signed on any dotted line.

If you can do it, in a year you will have saved $7,800 towards your down payment and you will have had plenty of practice living on the budget of a homeowner!

Sheila is a Money Coach and her aim is to motivate and educate people to take control of their finances. To discover how you can get on track with your own home buying goals, sign up for Money Matters Getting your Financial House in Order Money Coaching Package and find your own way home.