Pinching Pennies

Posted by Team Support on Wednesday, January 22nd, 2020 at 11:08am.

If buying a home is in your future, saving for the down payment could be your first hurdle.

Here, we've listed a few realistic tips, tricks, and hacks to get you started on your saving journey.

Now that you've taken the first steps and looked at your financial health critically, you probably have an idea of how much house you can afford. With that in mind, it's time to determine your down payment.

First, let's break down the down payment requirements:

  • If the home you are buying is less than $500k, the minimum down payment is 5%
  • If the home you are buying is more than $500k, the minimum down payment is 5% of the first $500,000 and 10% of the remaining cost up to $999,999
  • If the home you are buying is over $1million, the minimum down payment is 20%

A down payment of less than 20% will require you to purchase mortgage loan insurance. Mortgage loan insurance is 3.1% of the total cost of the home less the down payment. This amount gets added to your mortgage, so the size of your down payment will affect the cost of your total mortgage. This means that you'll not only be paying the principle amount of the mortgage loan insurance, you'll also be paying interest on it. While 5% might seem like a more achievable amount to save, we encourage putting down as much as possible to save you thousands over the life of your mortgage. If you'd like more information on how down payments affect your mortgage you can read about it here or speak to a mortgage specialist directly, we recommend Clinton Wilkins

Saving for a down payment might seem like an impossible task but you've got to start somewhere!

Begin by tracking and taking a critical look at your spending habits. Make note of patterns so you can identify areas in which you can make cuts. Some may be more noticeable than others, like that gym membership you haven't used in months, your daily trips to the coffee shop, or your way more often than necessary treat-yo-self nights at your favourite restaurant.

If the gym just isn't fitting into your schedule or lifestyle right now, there's no shame in cancelling for a year. Finding alternative ways to work out can save you money, make your more committed to your goals, and, depending which method you choose, could help your social life - because, let's be honest, trying to fit everything (working, exercising, socializing, eating right, getting enough sleep) into your busy schedule is challenging on a good day! Combining a few things you enjoy into one activity is sure to help you stay on track and motivated. So grab some pals and head out for a hike!

As someone whose blood is likely 60% caffeine, I understand the draw of a good americano, but if you're someone who stops at the local coffee shop more mornings than you'd like to admit, try limiting it to one or two times a week. Cutting it off cold turkey is sure to fail, especially when that afternoon latte is the only thing getting you through those last few hours at the office; a relapse is inevitable. Instead, start your morning off right by setting up your coffee at home the night before. That way, you'll wake up to the delicious smell of coffee and you'll be surprised at how your morning routine becomes easier and cheaper! You'll also be surprised at how often you'll be able to talk yourself out of that afternoon pick-me-up once you break the habit. (No shame in stopping by the cafe now and then though, I'm sure your barista is worried about you!)

Let's be real here, going out or getting take-out for dinner is way easier than cooking. All that chopping, sauteing, roasting, not to mention trying coming up with something to make EVERY. SINGLE. DAY. Now I understand why my mom got so annoyed with those "What's for dinner?" calls my sister and I made. I'm exhausted just thinking about it. But I swear, it'll all be worth it when you're chopping, sauteing, and roasting in a kitchen that you own! Try limiting your take-out and restaurant visits to special occasions, that way treating-yo-self actually feels like a treat. And no, much to my dismay, Taco Tuesday is not a special occasion but I could make a pretty compelling argument for Taco Week ;)

 

For the less obvious cuts to your spending, try adopting some of these tips:

Save a Percentage of Your Income Each Month - The actual percentage may differ for some depending on their income and expenses, but 10-20% is recommended. Since you've already looked at your spending habits, do a little math and determine how much of your income is leftover each month. With rising housing costs and incomes remaining mostly unchanged, it can be difficult for some to imagine having 20% leftover. If it's tight right now, start small and work up to a larger contribution over time. Make an appointment with a financial advisor and discuss your options for types of savings accounts that will get you the best bang for your buck. 

Make a Meal Plan - Whether it's actually prepping your meals ahead or just planning out what you'll be making for the week, meal planning/prepping will save you not only money but so much time! Just like you should never go grocery shopping on an empty stomach, you should never do it without a list. Knowing before you go what you plan on buying will keep you from making last minute decisions out of convenience and not built around things you already have, making the whole trip more expensive.

Sign Up For Free Rewards Programs - I was able to get enough points for $50 worth of groceries in less than one month (!!) just for buying things I would have bought anyway. I'm not sure what took me so long to jump on this wagon but I'll be looking into rewards options for all the stores I shop at regularly. Plus, the app I'm using make it so much easier to plan ahead since you can view flyers and build meals around things that get you the most points and what's on sale.

Walk Whenever Possible - This might seem like a small step but it will save you in gas money and possible maintenance costs over time. It will also help if you decided to forgo the gym membership for now!

Get Thrifty - The trends are in your favour with this one, thrifting is HUGE right now. Whether you're in need of a good pair of jeans, a couch, or a coffee maker for your new morning routine ;) try finding it second hand first. Stores like Value Village or Habitat for Humanity's ReStore are amazing places to buying everything from clothes to kitchen cabinets. You'll also get the added bonus of being able to humble-brag to your family and friends about the amazing deals you scored

Remember The 4 R's: Reduce, Recycle, Reuse, Repurpose - Reduce spending across the board; carefully consider each purchases before spending, is it truly a necessity or something you can live without for now. Recycle whenever possible and return recyclables for refund. Choose reusable options and stop paying for convenience. Repurpose your containers and take them to refill stations and bulk food store that let you buy only what you need to reduce over spending and waste. Most cafes offer a discount when you bring your own mug, plus, limiting yourself to take-out to only when you have your reusables is a great way to cut back on eating out. While you're at it, carry a water bottle wherever you go and stop paying for water. It isn't just good for the planet, it's good for your wallet!

If you live in the Halifax area you should check out our Green Living page for suggestions on which local shops to hit to get thrifty and remember your 4 R's as well as ways to cut energy costs once you've moved into your new home!!

With all these tips, tricks, and hacks, you'll be well on your way to saving your down payment! If you have any others that we may have missed, drop them in the comments below :)

As always, you have questions, we have answers! Contact us here or call to be put in touch with one of our agents who would be happy to help you get started on this exciting process! 

Call Us Now! 902-225-3196

Text Us! 902-830-3777

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