How to build your mortgage down payment.
Increasing the size of your down payment can be a very good idea. The bigger your down payment, the smaller the mortgage you’ll need for the purchase of your home. With a smaller mortgage, the smaller the payments you need to make, and the less overall interest you’ll pay.
Saving money.
While saving your down payment, you’ll want to keep it somewhere accessible, so you can add to it regularly — and withdraw it easily when you’re ready. It should also offer a return, so you’re earning interest while you wait for the right time to buy. But steer clear of high-risk investments, like stocks, that might fluctuate unpredictably, leaving you with less than you planned on.
Buying your first home in Canada?
If you are new to Canada, it is important for you to start building a credit history right away. To start, you’ll need:
- An international credit bureau report (if you came from the US). Vancity can request this report for you.
- A bank reference letter from your previous financial institution (if you came from outside the US).
Smart savings options.
Choose lower risk savings options to meet your unique needs:
- If you plan to buy a home soon, our high-interest savings account or 1-year cashable term deposit can help you earn higher interest rates while keeping your money accessible.
- If you’re planning further ahead, 3 or 5-year non-redeemable term deposits offer a higher rate on cash you don’t need to access readily. At maturity, you can renew your term deposit, invest in a different term deposit, or withdraw the funds if you’re ready to buy a home. Our sustainable wealth management team can help you put together a savings and investments plan.
Consolidating debt.
As a first-time home buyer, you may want to consider consolidating your debt under a single loan to reduce your interest rate and monthly payments. Every debt payment you have reduces the amount you can borrow for your mortgage.
Consolidating debt may include items such as:
- Credit card debt
At any time, you can convert this variable mortgage to a fixed-rate mortgage for the remaining term or longer. This flexibility means that when your life circumstances change, you can make changes to your mortgage too. - Student loans
According to Statistics Canada, around half of college and university students owe debt at the time of graduation, which can delay their home-buying plans. - Car loans and leases
Both car loans and leases count as debt, but consolidation isn’t always advisable, depending on the amount of your loan or lease. - Small loan balances with higher interest rates
Eliminating smaller loans, including balances you hold with other financial institutions, could reduce your overall debt load.
If you’re interested in consolidating your debt, we can help you find a solution that makes sense for you. Explore smarter ways to pay off your debt.
Using your FHSA and RRSP savings.
You may be able to withdraw a portion your RRSP savings to buy or build a qualifying home through the Home Buyers’ Plan. Before you make a withdrawal, check the Government of Canada Home Buyers’ Plan to get the most up-to-date information and make sure you follow the rules to avoid taxes or penalties.
While you're saving up, you should also utilize an FHSA so your down payment grows tax-free, while enjoying other benefits, until you're ready.
Using monetary gifts.
You can put gifts of money from family and relatives towards a down payment. If you do, you may need to show where the money came from and confirm it’s non-repayable by providing bank statements and a letter from the gift-giver.
Sharing your mortgage.
If saving for a down payment on your own feels out of reach, it might be worth considering a joint mortgage with other family or friends to share the costs. This option is becoming more popular as people look for creative ways to achieve their goals, such as:
- A multigenerational family looking for a single-family home where young adults can get a start or parents can age in place
- Friends who would like invest in a duplex or other multi-unit building
- Community groups who want to build co-housing
To help members make their dreams of owning a home a reality, we are happy to offer innovative financing options, like our Mixer Mortgage™ for first-time homebuyers.
