Buying a house in Toronto is one of the best investments you can make. However, saving up enough money for a cash down can feel impossible if you don’t have a solid saving plan. If you’re looking for ways to save for a home, you’ve come to the right place. We’ve put together a list of practical tips that can help you save money for a house.
Let’s get into it.
1. Determine how much you will need to save
The first step in the saving process is to figure out the amount you should save toward a cash down. This will save you the possible consequences of taking up a mortgage that will become burdensome down the road.
In Canada, the minimum down payment for a house is 5% for houses valued at $500,000 and below. It’s best to put down at least a 20% cash down to avoid purchasing CMHC insurance and save more money in the long term.
The CMHC recommends that your housing expenses should not exceed 35% of your gross monthly income. So if your gross monthly income is $10,000, you can save up to $1,750 for your house payment. You may need to consult with a mortgage advisor to help you determine the amount you need to save, how much you can afford, and the types of mortgages you could qualify for.
2. Pay down existing debts
If you’re planning to buy a house in Toronto, paying down your existing debts may seem to be counterintuitive. However, it’s necessary because mortgage lenders look at your debt-to-income ratio to determine your borrowing risk. Besides, having too much debt limits the amount of money you can save for a house. In Canada, the acceptable debt-to-income ratio must not exceed 36%. It’s a good idea to divert your extra income to pay down your existing debt and alleviate financial pressure, making it easier for you to save toward a cash down.
3. Compare online brokerages
Opening an RRSP account with a Canadian online brokerage can be a good way to grow your money faster and put toward a cash down.
Saving in an RRSP account comes with several benefits. Apart from your savings growing tax-free, you can borrow up to $35,000 from your RRSP account to help finance your cash down on a house in Toronto.
4. Consider reducing some of your expenses
You can save a lot of money toward a cash down by looking for cheaper ways to do things. Lifestyle adjustments like eating out less, taking vacations closer home instead of going abroad or skipping vacations altogether, working out at home instead of paying for a gym subscription, and selling extra vehicles can help you save more money. If you spend a lot of money on expensive clothes or gadgets, consider buying clothes and gadgets that cost less so that you can put more toward your down payment. However, reducing your expenses doesn’t mean downsizing to a point where you’re living just above the poverty line. It simply means being smart with your money.
5.Get a side hustle
With the considerable growth of the gig economy, it’s easier than ever for aspiring homebuyers to make quick bucks on the side. Consider spending a few hours of a week doing tutoring gigs on a platform like Wyzant, working as a virtual assistant, or driving for a ridesharing service. You can also take up freelance gigs on sites like Upwork and Fiverr, launch a print-on-demand store, become an affiliate marketer, become an Instagram influencer, or deliver meals for an online delivery service. You can make more than $1,000 a month from side a side hustle and boost your cash down savings.
If you have a spare room in your apartment, you can list it on Airbnb and make extra cash. You can also rent out your car to prescreened customers when it’s not in use to make some extra income.
6.Choose a better credit card
All credit cards are not the same. Some can be expensive in the long run while others can help you save money.
Choosing a rewards or cash-back credit card is a good idea if you want to earn rewards on every dollar you spend or stretch your budget. Some cards offer a higher cash back rate than others, so you want to choose a credit card that will leave you with more cash in your pocket.
If you have a low credit score and you’re looking for ways to improve it, it’s best to go for a credit card designed for people with limited credit. It’s also a good idea to choose a low-rate credit card to reduce the amount of interest you pay and save more money while still earning rewards.
Choosing the best credit card can be a hassle if you have to do it manually. One of the easiest ways to find a better credit card is using a credit cards comparison tool.