Go with a downpayment of anything less than 20% and you’ll have to pay high-ratio mortgage insurance (like that offered by CMHC). This insurance premium is calculated as a percentage of the loan amount, and the percentage ranges from 0.5% to 2.9% of the mortgage amount and depends just how much you managed to come up with for the downpayment, along with a bunch of other factors. If you can swing 20% down, you can go with a conventional mortgage and save thousands and thousands of dollars.
One way to come up with more for a downpayment is let everyone in your life know that this is your goal and you’re happy to accept their gifts. For every birthday or other gift you might receive, you’d like ‘em to give you the equivalent cash that you can put towards the thing you really, really want.
If you are expecting a tax refund this year, save it. The average tax refund is just over $1400, and that’ll give your downpayment fund a nice boost. So too will that raise you just got, the bonus you know is coming, or that extra money on your paycheque once your deductions stop. Since you’re already living without that money, that’s a way to save without giving up anything.
Hey, if you’re saving for a downpayment, your focus should be on making money, not spending it. Get a second job. Get a third job. Sell make-up. Have a home-based sales party. Walk dogs. House-sit. There are a million ways to make money. Employ as many of them as you can.
The biggest savings will come from your concerted effect to cut your expenses. So all that money you were spending on entertainment and shopping can now go towards your downpayment account. This is where the rubber truly meets the road: Are you determined to buy a house, or do you want to buy a house AND go out for dinner? If your answer is the second, you may not be as ready for home ownership as you think you are.