One of the most important things that you need to do before buying a home is save up for your down payment. This will make it easier for you to get a mortgage loan.
However, there is a tradeoff involved. The higher your down payment, the more you will have to pay for CMHC insurance. This insurance is a requirement for all mortgages in Canada.
1. Save up for a down payment
When you’re saving for a down payment, it can feel like you’re racing against the clock. But you’re not, because there are ways to get ahead and save quickly for a down payment on your new home.
The first step to saving for a down payment is to create a budget and start working on your spending habits. This will help you determine where your money is going, and what can be cut out. Then you can set a savings goal for yourself and start to stash away money every month toward it.
It might take a few months to make your budget work, but stick with it and soon you’ll be a money-saving pro! Once you’ve figured out what works best for you, set up automatic transfers to a savings account specifically dedicated to your down payment.
You can also try selling a few things you no longer use to raise money. This can include old clothes, household items or even some extra furniture you haven’t used in years. If you’re lucky, this will be enough to cover your down payment.
Another way to boost your down payment savings is to work part-time or take on a side gig. Whether it’s cleaning houses, tutoring, or painting, this option will allow you to make some extra cash on the side without taking too much time away from your day job.
When you’re ready to move out of your parents’ house, you might be able to save on first and last deposits by sharing the cost with friends or family. This will save you from having to pay a higher deposit and can help you accelerate your down payment savings by a few years.
Once you’ve cleaned up your credit score and saved a decent emergency fund, you’re ready to begin the real work of buying a home. You can also take advantage of the lowest interest rates and home prices in decades by negotiating for a low mortgage rate or looking for a lower price.
2. Look for a lender with a low interest rate
One of the most challenging parts of a new home purchase is finding a lender who can provide you with a loan that suits your needs. You may be surprised to learn that not all lenders are created equal, and some offer better rates than others. To be on the safe side, scout out a mortgage broker or two who can provide you with multiple quotes from reputable lenders.
A good rule of thumb is to find a lender with a minimum down payment of 20 percent, and an interest rate that will allow you to comfortably afford your mortgage. You can also shop around for lenders who offer lower or no interest payments for the first few years of your mortgage, as this will significantly reduce the total amount you have to pay over time. The best part? Once you’ve found a reputable mortgage provider, you can get started on your dream home by choosing from amongst a multitude of available properties.
3. Ask for a secondary financing option
While it may sound counterintuitive, asking for a secondary financing option is actually a good idea. This is because it can help you save money in the long run, especially when you compare it to the cost of CMHC fees. In addition to avoiding the fees, secondary financing can also offer you a more affordable interest rate than your first mortgage. However, you should do your research and ensure you have the right information before making any decision.
You should also remember that your lender will likely charge a higher interest rate than if you had a separate line of credit, so it is a good idea to ask for a quote before signing anything. If you are unsure about your options, please get in touch with us and we will be more than happy to provide you with more advice.
4. Try to find a home with a lower price
When you are looking to purchase a home, it is crucial that you understand what you want and need in your new home. You can start with making a list of your must-have features and then look for homes that meet those requirements. You should also consider the location and price of the property. If you find a house that has everything you want but at a lower price, it might be worth considering. You can try to get a lower price by negotiating the deal down or putting in an offer that is below asking price.
There are ways to minimize the costs associated with CMHC fees and still buy your dream home. One way is to use a private mortgage lender, which will not charge these fees and will allow you to pay a smaller down payment. You will also pay higher interest rates and bank fees, but the benefit of avoiding CMHC fees could be worth it to you in the long run. If you have any questions about CMHC fees or how to avoid them, please don’t hesitate to get in touch with me at the Mortgage Centre.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.