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Building Equity

Building equity and budgeting for a down payment

When applying for a home loan, lenders will partially base their decision on the amount of equity you have in your existing home or the amount of down payment you have toward purchasing a new home. It stands to reason that the more money you have, the better the chances of qualifying.

This sounds simple in theory, but in a world of growing expenses and record high debt building a down payment can be challenging to say the least. With this in mind here are a few simple tips to building a bigger down payment.

  • Consider borrowing from your existing RRSP under the Home Buyers’ Plan.
  • Consider using an RRSP as a savings vehicle to gain a tax deduction on the money you save. (Ask Derek for details)
  • Lean on your family. Down payment money can be gifted from a relative and get you started sooner.
  • Reduce your spending. Applying a strict budget for a shorter duration might be the answer to speedy savings.
  • Apply any tax refunds or bonuses from work toward your down payment.
  • Hold off on additional luxuries such as vacations or new vehicles until your savings will allow you to do so.

Building up equity or saving for a down payment will not happen overnight so it is important to have a plan. The reality is you will need to pay some sort of cost for shelter either in the form of a mortgage or rent. The difference in homeownership is that you will be building wealth and adding an important element to your overall retirement strategy.

Please feel free to give me a call anytime to discuss your mortgage strategy and personal options. The sooner you own your home, the sooner you start to get ahead!