How To Save Up For A Down Payment On A Home In Edmonton
Saving up for a down payment is difficult—we know that. And what’s more, saving up for a down payment in 2022 is even harder than years past. Inflation in Canada is changing the way many of us look at paying bills and saving money, but that doesn’t mean that buying a home needs to be out of the question.
To save for a home, you must prioritize your spending, cut down on unnecessary expenses, and/or increase your income. And don’t forget—you will also need to be conscious of your credit score to ensure that you can get approved for a mortgage.
1. Find how much you need to save
Before setting a budget and finding ways to get you to your desired saved amount, the first step is to get pre-approved for a mortgage. Doing this will allow you to know how much money you need to save, as well as allow you to shop homes within your budget. The average homebuyer needs to put down between 5% and 20% of the home’s cost. You can do this by going to your bank’s website and using their online calculator!
2. Set a weekly budget
It is so easy to swipe your credit card and forget about your purchases until it is the end of the month and your bills come in. But if you are looking to purchase a home in the near future, your credit card should be left at home.
Canada has access to some incredible Canadian-owned prepaid credit cards that have been proven to help people with budgeting. Companies like KOHO and Neo are just two options to look into. With these cards, you can set a weekly budget while also earning rewards for spending your money at certain places—this is usually in cash back! An additional perk is that these cards come with handy free mobile apps that help you track your spending categories.
3. Increase your income
We know that increasing your income may not come easily to everyone, but this is an easy way to save up quicker for your dream home. You can do this in one of four ways:
- Ask for a raise at your current job
- Switch to a job that has a higher salary
- Start investing
- Pick up a side gig
Nowadays, Millennials and Gen Z are well-acquainted with the side gig. This can be in many ways: freelance writing, dog walking, opening an Etsy shop, voiceovers, taking quizzes… you name it! Any of these side gigs can get you anywhere between $250–$1000 of extra income each month.
4. Save on rent
It goes without saying that living completely on your own can be challenging. With bills steadily increasing, the cost of living is becoming difficult for many.
Consider swapping out that two bedroom for a studio, or maybe even bringing on a roommate or two to split on costs! Do you have a good relationship with your parents or a family member? Maybe they have some space for you to hunker down for a while.
5. Set up automatic withdrawals
Life is busy and it is so easy to forget to move your money around at the end of each month. Book a meeting with your bank to discuss setting up automatic withdrawals that go to a secure account that you don’t have everyday access to. After some time, you won’t even realize that the money is leaving your account. Consider setting up withdrawals of $100–$500 each month. Imagine, after a year you can have $6,000 saved for your down payment!
6. Look for a cheaper way of doing things
It can be so easy to get used to a life of luxury—but just because you are saving up for one of your largest purchases yet doesn’t mean that you have to give it all up. Here are some suggestions on common everyday purchases that can be made cheaper:
Nails: instead of heading to the salon every 2 weeks for a new set of nails, purchase a kit online and do it yourself at home. Kits usually cost ~$50 to get set up, which is around the same cost of your bi-weekly nail appointment.
Clothing: stop purchasing brand new clothes. If you are in need of a new article of clothing, check out your local thrift shops first. If you didn’t find what you were looking for, try shopping on Poshmark or Facebook Marketplace.
Vacations: traveling is a privilege, but you can still make do on a budget. Check out Swoop or Flair for cheap flights, and once you get to your destination, consider renting out a private room at an Airbnb or staying in a hostel. Better yet, do a getaway to close-by Canadian cities like Vancouver, Calgary or Winnipeg.
Eating out: we all deserve a nice night out every once in a while, but if you are a true foodie, consider getting takeout and sitting in the park with a friend. This removes the need for a tip! Or, get crafty in the kitchen and invite your friends over for a potluck.
Entertainment: concerts, shows and movies can easily rack up your chequing account. Instead of spending money during your spare time, find free things around Edmonton! Thankfully for us, our city is filled with many free activities—especially in the summertime. Check out the Fringe, Edmonton Street Performers, free concerts in Churchill Square and more!
Books & movies: there is something so special about opening up a brand new book and getting started on the story. But what do you do with those books once you’re finished with them? The Edmonton Library has so many free books, movies and games—all when you sign up for a library card.
The list doesn’t end there. Let us know if you think of any more ways to save money easily!
7. Invest your savings
Though we are far from being financial advisors, it is proven that investing your money can be the easiest and fastest way to increase your income. Investing can be daunting and worrisome, so if you don’t trust yourself to make the right decisions and grow your investments, hire someone to do it for you! Edmonton is filled with so many talented investment brokerages. Send us a message to get our suggestions!
8. Borrow from your RRSP
If you have been building up your RRSP for some time, did you know that you can withdraw up to $25,000 from it (without any penalty) to put towards your first home? But be warned—there is a catch. Within 15 years, you are expected to pay back the full amount. If you don’t repay in time, the borrowed amount is considered income and you will be taxed on that amount. If this is something that you are considering doing, please contact your financial advisor beforehand!
9. Find programs or incentives you can utilize
The City of Edmonton, Government of Alberta and the Government of Canada offer incentives that can empower first time home buyers to purchase their dream home. This is done through programs like the First Time Home Buyer Program, the City of Edmonton’s First Place Program, Down Payment Assistance Program and many more. We highly encourage every first time home buyer to do their research and see what programs apply to them!
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We hoped this inspired you to start saving for your dream home! If you have any questions regarding down payments, homes in your budget or anything in between, feel free to reach out to us at any time. We hope to work with you when you are ready!
