Between renting an apartment and buying a house, the house is always a better choice. This is especially true nowadays because interest rates are extremely advantageous. The only disadvantage with acquiring a home is that you have to make a first deposit. Here are some tips to quickly raise the money needed for the first deposit.
Canadian banking laws require that you have at least 20% of the value of the house to make your first deposit. If you do not have that much money, you will have to buy insurance on your mortgage and you will have to make a first deposit of at least 5%.
The average price for a house in Canada is approximately $ 350,000. That means you will need at least $ 17,500 if you want to buy a house. If possible, it is better to have more than the minimum deposit. The bigger your first deposit is, the cheaper your mortgage will be at the end. For example, if you put only 5%, your monthly payments will be very significant. Remember that monthly payments are also added to all costs associated with repairs, renovations, taxes, notary fees and other costs. Finally, the lower your first deposit, the higher the cost of your mortgage insurance.
Save for the first deposit
When you start thinking about a house, you should also think about saving for the first deposit. A good idea would be to start making automatic payments from your checking account to another account reserved for savings. If you miss $ 1,500 or less you can also apply for a personal loan.
Savings accounts with high interest rates are a good option for picking up money. However, it is rare to see the interest rate exceed the 2% threshold. Also, some additional fees may be associated with this account. Another disadvantage is the temptation to withdraw that money for use for other purposes.
Government savings bonds are another way to save money. However, make sure that these vouchers allow you to withdraw your money at any time, because if you find the home you need, you will need money fast.
The ICG also a great way to save money. The only drawback is the impossibility of withdrawing money at any time. However, if you do not plan to buy your home in the very near future, it might be a good idea to save for the first deposit.
The money market is another way of saving. Make sure you can withdraw your money at any time.
If you are buying a home for the first time, the Canadian government allows you to withdraw up to $ 25,000 from your RRSP under the Home Buyers’ Plan. This $ 25,000 must be repaid within 15 years. When you repay this money, your retirement plan will not be improved because this money could not be invested and therefore did not generate any return.
If you buy for the first time, this program is for you. However, be careful about the amount you withdraw. It is best to save money and use the least amount of money from your RRSP. Save well and you will benefit from lower monthly payments, in addition to paying a little insurance. However, to get there, you must be disciplined and patient, the rest is just a matter of time.