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

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?

Posted in: Money, Real Estate

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