When it comes time for you to purchase your house, you should be ready to make the down payment required by the seller. The amount you can put down upfront will also affect your mortgage loan approval. You stand a better chance of being approved for a mortgage when you pay a considerable amount as down payment. Consequently, it will also affect the amount of your repayments.
In Canada, you can save a lot of money by putting down at least 20% as a down payment for your mortgage. Your mortgage payment and initial home equity will also benefit from a generous down payment as well. Overall, the higher your down payment, the better terms you are able to enjoy.
The tricky part about down payments is saving up for it. Some people get overwhelmed by their target amount while some just couldn’t find the extra funds to save up. These tips should help you save up for your down payment:
Know Your Income
You need to gauge your monthly income so that you know how much you can save up. You need to list your monthly expenses and subtract that from your income. You will then see your potential savings in the difference. Save up as much as you can from the leftover funds and you can start building up your down payment.
Know The Fees
There are a lot of expenses that you need to tackle when it comes to your mortgage. You will need to pay for lawyer fees, real estate fees, and other charges. Understand that these will also come from your savings. If you want to have an idea of what the fees are and how much you need to save up for, you can contact mortgage brokers or visit sites with mortgage forums. Come up with a reasonable estimate and add it to the total amount you are targeting to save.
Open A Savings Account
Most people do not understand the importance of having a separate savings account. You can easily set automatic deposits to your savings account so that you are less likely to spend that money. You can set a date every month which is usually your payday. You are going to be less tempted to spend your monthly savings this way.
Know Your Target
Do not just think about the minimum down payment. Go all the way and visualize how your mortgage will look like if you paid a bigger down payment. Work the figures until you come up with a target amount that you can realistically achieve. When you reach your goal, you will find that the resulting mortgage payments will be easier to meet as well.
Saving up can be a daunting task, but with discipline and the right perspective on saving and spending, it can be done. You can easily apply these tips to your life even after your mortgage has been approved. Saving money is a great habit to have and can help you eventually gain financial freedom.