Saving for a down payment on your first home takes a careful plan

Financial consumer agency says minimum is 5% of purchase price if you plan to spend $500,000 or less

Krystal Yee poses for a photograph in Vancouver, on Monday October 28, 2019. THE CANADIAN PRESS/Darryl Dyck

When Krystal Yee finished college and entered the workforce, she set a goal much like many other graduates: find a way to save enough to buy a home.

Yee, who lives in Vancouver, said her career in marketing and as a personal finance blogger were only landing her an average of $44,000 a year.

The benchmark price for a detached property in Vancouver was $901,680 at the time and apartments were going for about $405,200.

Yee didn’t let the conditions intimidate her. She crafted a plan and in 2011, at the age of 28, nabbed a one-bedroom townhouse about 25 minutes from Vancouver’s downtown core in New Westminster.

The first step Yee took was working out how much she would need to save for a down payment. She used listings and the local real estate board to learn about average home prices and then turned to a series of online calculators to help her calculate how much cash to stash.

The Financial Consumer Agency of Canada says the minimum amount you’ll need to save for a down payment if you plan to spend $500,000 or less on a home is five per cent of the purchase price.

If the home you want to buy costs between $500,000 and $1 million, the agency says to save five per cent of the first $500,000 of the purchase price and 10 per cent for the portion above $500,000.

If you intend on shelling out more than $1 million, use 20 per cent as your ballpark savings rate, the agency recommends. It also warns that if you’re self-employed or have a poor credit history, you may be required to provide a larger down payment.

Before you even consider buying a home, Yee says it’s important to manage your debt. When she was thinking of purchasing a place, she had $20,000 in debt, so she started living even more frugally and taking on gigs whenever she could.

“I did that through working two full-time jobs and a bunch of part-time jobs and really made that my focus,” she said.

Some of the work was unglamorous, she admits, and only paid between $8 and $10 an hour, but it added up and within a year, she was debt-free. Looking for freelance work and selling odds and ends online helped too.

Savers may also be lucky enough to receive help from family members.

“I personally didn’t get any help with my down payment, but if my parents had offered, I probably wouldn’t have said no, but I also don’t think that it should be expected,” she said.

Yee used a method that she calls “building your budget backwards.”

She worked out that she wanted to buy a home within three to five years and divided up the cost of her ideal home to calculate what she thought she could save every month. Then, she subtracted the monthly rate from her budget before calculating how much she’d spend on rent, bills, groceries and other things.

Some people, she said, might do this calculation and realize they don’t have enough to live on.

If that happens to you, she said you must decide whether to save at a slower rate, look at more affordable homes or in areas like suburbs where prices can be lower, or find ways to increase your earnings.

“Some months I made that goal and some months I didn’t,” she admitted.

READ MORE: Trudeau promises added incentives for first-time home buyers

READ MORE: Conservatives’ plan to ease mortgage stress-test rules may raise debt and prices

Yee recommends anyone looking at saving for their first down payment take advantage of the home buyer’s plan, which allows you to withdraw up to $35,000 from your registered retirement savings plan to buy or build a home and gives you 15 years to repay the amount you took out.

She used the plan in connection with her tax returns to build up a stash of cash — and it’s a method she suggests others mimic.

“All the money I was saving for my down payment, I would put into my RRSPs, and then with the tax return, I would reinvest in my RRSPs,” she said.

Tara Deschamps, The Canadian Press

Like us on Facebook and follow us on Twitter

Just Posted

Houston homicide suspect remanded in custody

A Houston man accused of the second degree murder of Elija Dumont… Continue reading

Fire chief looking for volunteers firefighters in the Luck Bay area

Fort St. James fire department is holding an open house at the Sowchea Bay fire hall on Nov. 28.

William Griffin arrested in Houston homicide

RCMP have now arrested William Griffin, the man wanted in connection to… Continue reading

No crafts fair in Fort St. James today due to a power outage

Update: Residents in the district lost power on Nov. 16 at 7 am

B.C. municipality wants ALC to reconsider their decision in regard to pipeline work camp

The ALC had rejected the construction of the Coastal GasLink work camp behind the Vanderhoof airport in October

B.C. politicians view supermodel’s transition journey on Transgender Day

Liberal MLA Jane Thornthwaite and New Democrat MLA Spencer Chandra Herbert appear in the documentary

B.C. won’t appeal decision protecting ICBC court experts

Change to evidence rules next to save money, David Eby says

1898 Yukon gold rush photo featuring Greta Thunberg look-alike sends internet into tailspin

Jokes erupted this week after a 120-year-old photo taken by Eric A. Hegg surfaced from archives

BC Ferries’ two new hybrid vessels set sail for B.C. from Romania

Two Island Class ferries to be in use by 2020

Distracted driving tickets not for ICBC revenue, B.C. minister says

Minister Mike Farnworth calls SenseBC analysis ‘nonsense’

CN Rail strike and lack of trucking alternatives stoke forest industry fears

Companies calling on the federal government to ‘do everything in its power’ to end the strike

Prime Minister Justin Trudeau unveils new Liberal cabinet

Pivotal role in his new cabinet for a minority-government era goes to Chrystia Freeland

B.C. mom, kids on bike turned away from Tim Hortons drive-thru

Car-free for years, Charity Millar ‘felt gross’ being denied service

B.C. woman puts call out for 10,000 personal, heartfelt Christmas cards for the homeless

Christmas Card Collective enters into third year of making spirits bright

Most Read