How do I get a down payment? (…in Vancouver?!)

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Housing costs in Vancouver are infamously high.  I hear a lot of whining and moaning, especially from certain groups of people (*ahem*) who are used to living in big houses and driving fancy cars.  One girl I used to work with was studying to become a lawyer.  Her family arrived in Canada, with lots of cash saved, bought the giant house, bought the multiple cars, and now she is wondering how she will afford the same.  So many lunches were spent listening to her complain about the “unfairness” of it all.  I got news for you!  Your parents got the cash to buy those houses in the first place because they saved!

Photo Credit: Images of Money via Flickr

Photo Credit: Images of Money via Flickr

There’s no magic pill here.  If you want to own a home – anywhere – you’re going to need to save up money, build equity, and make smart investments.

Brian and I saved up for both of our condo purchases the hard, dull way.  We had no help from anyone.  Here’s how:

RRSPs

In Canada, when you contribute to an RRSP, you are also potentially saving up for a future down payment. With the Home Buyer’s Plan, you can withdraw up to $25,000 tax-free towards the purchase of a home, provided the money has been in your account for a minimum of 90 days. Withdrawals have to be paid back over a period of 15 years, starting the 2nd year after the purchase.

Brian and I used $4000 from my RRSP towards the condo purchase. I debated taking out more, but at the time, I  did not want to deplete my investments too much. In retrospect, I probably should have taken or more to minimize my mortgage payment and insurance costs.

Minimize rent

If you’re going to be buying a home, why waste money on rent in the meantime? Brian and I found a cheap apartment to live in while we were saving up for the condo. We lived on Vancouver’s west side for only $895 a month in rent.  And even before living in that apartment, we had a roommate in our two bedroom apartment in order to keep rent costs down.  As a result, we were able to bank a lot of our income towards saving for a down payment – a full $1000 a month, in fact.

Other people we know have done things like downsizing to a studio or rented room while saving up, or even moving back home and living with their parents while saving up.

Sell unwanted items

If you’re looking to buy a home, you’re also probably signing up to move as well. Unless you’re buying an investment property, boxes and packing tape are in your future! Moving sucks when you have a lot of stuff, so why not sell some of it, reduce the number of items you have to move, AND make some money at the same time?  Furniture is often the biggest annoyance to move, so why not sell off some of your unwanted or unnecessary pieces before the time comes to move?

Brian and I sold off stuff like our old couch and our bookcases prior to moving. As a result, we were able to move everything in one truckload AND we made about $1000.

Things not to do for a down payment

While it’s important to save up money for your future home, I would generally not recommend:

  • theft, robbery, or blackmail
  • lottery tickets
  • marrying rich older widows

Any other ideas for saving up money for a down payment?

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18 Comments

  1. You don’t recommend marrying rich older widows? Hrrm… That was my plan for so many things!

  2. Pauline says:

    to be fair to your whining friend houses now are worth about 10 years worth of salary when they used to cost 3-4 years of salary. But sure, our parents didn’t have tech gadgets and sunny far away holidays. I used a first buyer tax break as well, don’t know if you have them in Canada but any government backed program is worth looking into.

    • CF says:

      You can still get a nice place to live on 3-5 years salary. My current condo is about 4 years of salary for me. You might not get a house, but I don’t think people should feel entitled to a house when living in a city like Vancouver, San Francisco, or New York.

  3. Absolutely true, and way to stick to the down to earth solutions. Great post.

  4. Taking money out of your RRSP would be the equivalent to pulling money out of your IRA or ROTH IRA here in the states. The only downside is that you have less going towards retirement but still an effective strategy none the less.

    • CF says:

      That’s why I didn’t want to take out all of it. Even though I’d be paying it back, I felt like I was losing out on earnings in the mean time.

  5. I am going at it the old fashion easy. I am saving money here and there, plus any extra income goes to the payment fund.

  6. I only wish I had a secret big enough to blackmail someone for that kind of money 😉 It took bf and I several years to save up enough money for our downpayment. We didn’t really have a strategy other than, work hard, cut back and live on a tight budget.

  7. Depending on how much of a down payment if someone wants and they are serious they will track their money and budget. We tracked it in our head and it was the one thing we can look back on and say,not a smart decision. The reason is we see how much money we have been able to spend and live a good life with the budget although it’s not for everyone. That is one way to stick to the plan in order to achieve the end goal= Down payment. We also made extra money on the side whenever we could, worked over time hours but did not take money from RRSP’s as we felt it was simply another loan hanging over our head that we had to pay back. If we didn’t have the money saved isn’t wasn’t the right time for us to buy, end of story. That’s just the way we operated but the First Time Home Buyers plan has helped many get into a first home. I can imagine in Vancouver it would come in handy with the price of homes though . Great post.

  8. shyla says:

    How long did it take you both to save your full down payment?

    • CF says:

      We took two years to save. The first year, we didn’t push too hard, but in the second year, we put away $1000 each month, plus any extra income that we made. Meanwhile, we were putting $500 a month away into a RRSP. We ended up with about $20,000 for a downpayment.

  9. Saving up for a down payment is something I hope to start doing within the next year or so. I think a lot of the strategies I dedicate to paying off debt, will come in happy when it comes to bank a down payment. It just sucks how freaking big the down payment has to be!

  10. eemusings says:

    Haha, I can totally relate. Saving for a house will be something we seriously start next year.

    We really need better dense housing options in Auckland. When they strted building apartments and townhouses many turned out to be leaky shoeboxes. And quite understandably nobody wants to buy a tiny, soulless, non watertight apartment or townhouse. Hopefully the next wave will be better and result in some viable, livable dwellings.!

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