If your down paymentDown payment The money you put into buying a large item like a car or home.+ read full definition is at least 20% of the purchase price of your home, you can apply for a regular mortgageMortgage A loan that you get to pay for a home or other property. Often the loan is for 20 years or more. You make a set number of payments for a set amount each year.+ read full definition. If you can’t save that much, you will have to apply for a high-ratio mortgage or second mortgage.
3 tips for saving a down payment
- Keep the money separate from other savings.
- Grow your money safely in no-risk or low-risk investments.
- Save in an RRSP if you’re a first-time buyer.
Learn more about short-term savings options.
Your employer may offer savings plans that are suitable for saving for a down payment. The advantage of these plans is automatic saving through payroll deductions.
Make saving automatic
You can arrange for a set amount to be taken each month, from your bank accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition or from your pay, to help you save. This is often called a pre-authorized debit (PAD), pre-authorized contributionContribution Money that you put into a savings or investment plan.+ read full definition (PAC) or pre-authorized purchase (PAP). Learn more about automatic savings plans.
Saving in an RRSP
Under the federal government’s Home Buyers’ Plan, you can use an RRSPRRSP See Registered Retirement Savings Plan.+ read full definition to save for the down payment on your first home. Your contributions are taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition deductible. And you can borrow up to $35,000 from the RRSP for your down payment when you are ready to buy. You won’t pay any tax on the money as long as you pay it back over the next 15 years.
A larger down payment will reduce your mortgage payments, and may give you the room to add extra payments to pay off your mortgage sooner.
First-time home buyers can take up to $35,000 from an RRSP for a down payment.
- Save the money in a separate account.
- Grow your money safely.
- Consider saving in an RRSP.
- Open an automatic savings plan.