Smart Strategies to Save for Your First Home's Down Payment in Ajax

access_time 18 Jun, 2024 06:38 am visibility 805 | comment 0

Planning to buy an MLS listing in Ajax a few months or years down the line? Then, like most homebuyers, you must be losing sleep over the task of saving enough money for the down payment. Bankrate’s research shows that 40% of aspiring homeowners find the cost of down payment and closing costs too high; often stopping them from achieving their homeownership dream. However, here’s a fact most homebuyers don’t know - saving for the down payment of a house is not that difficult if you know the right strategies.

Here are 8 effective ways to successfully save for the down payment of your future home in Ajax.

Put Your Money Where It Can Grow

Interest rates on traditional savings accounts in Canada are often very low. This means that even though you’re saving diligently, your money won’t be growing fast.

Instead, you should put your savings for the down payment into a high-yield savings account or Capital of Deposit (CD). High-yield savings accounts in Canada offer a higher interest rate than traditional savings accounts. On the other hand, a CD provides a guaranteed interest rate for a fixed term.

Set Up Savings on Autopilot

Another smart way to save for the down payment of an MLS listing Ajax is to automate your savings. By automating your savings, you won’t have to worry about manual transfers every month. Also, this tactic can save you money if you are tempted to spend your savings elsewhere.

So, have a regular transfer go from your checking account to your savings account automatically. This will ensure consistent growth towards your down payment goal.

Trim Your Expenses

Trimming your expenses is another tried and tested tactic for first-time homebuyers to achieve their down payment savings goal successfully. To trim your expenses, first, find out areas where you can cut back. Look for the recurring expenses in your life that fall in the non-essential category and can be reduced or eliminated altogether. This could be -

Dining out expenses - Consider cooking more meals at home or finding cheap eating spots.

Entertainment expenses - Find out if you can cut back on subscriptions, expensive hobbies, or regular night outs. Instead, try to find entertainment options that are cheap on the wallet or are free.

Subscriptions - Review all your subscriptions such as cable, streaming services, or gym memberships and cancel any you don’t use regularly.

Once you have identified areas to cut back, redirect those savings towards your down payment. Every dollar saved is a dollar closer to an Ajax MLS listing.

Ask for a Pay Raise

The fourth tactic first-time homebuyers can use to close the gap on the down payment is asking for a raise. A higher income directly translates to more money you can allocate towards your down payment. Even a small increase can significantly boost your down payment savings timeline. So, schedule a meeting with your manager and politely ask for a raise by highlighting your accomplishments and value.

Strictly Keep Bonuses and Raises for Savings

“Lifestyle Creep” - this is a tendency to increase your spending habits as your income increases. Once you get a raise at work, you might want to upgrade to a better rental apartment, eat out more often, or take out your private car to work instead of using public transport.

However, as a first-time homebuyer saving to buy an MLS listing in Ajax, you must absolutely avoid this trap. Bonuses and raises are windfalls that can give your down payment savings a big boost. Hence, put all or a larger portion of your bonuses and raises towards your down payment instead of letting it inflate your everyday spending.

Find a Part-Time Hustle

You can also consider earning extra income on top of your regular job. By taking on a part-time job, freelance work, or side gig, you can create an income stream specifically for your down payment.

While finding a side hustle, make use of your existing skills or go for something new that interests you. Choose a job that fits comfortably within your existing schedule and doesn’t lead to burnout.

Think About Investing Your Money

Instead of just saving your money in a bank account, you can also consider investing your money in stocks or cryptocurrency. This is another smart strategy to potentially grow your down payment savings to buy an MLS listing in Ajax. These investments have the potential to earn a higher return than a savings account.

However, keep in mind that there’s no guarantee that you’ll make money with stocks or crypto. The value could go up or down so there’s a chance you could lose some of your initial investment. Because of this risk, you should only invest money you’re comfortably potentially losing.

Pay Down Debt with High Interest Rates

High-interest debt such as credit cards can eat away at your income with monthly payments. Every dollar you pay in interest is a dollar you can put towards the down payment of your first property in Ajax.

This is why you must try to aggressively pay down high-interest debt when you’re saving to buy a house. By doing so, you can free up money each month which can be directed towards your down payment savings.

Also, when applying for a mortgage to buy an Ajax MLS listing, lenders look at your debt-to-income ratio (DTI). So, lowering your debt from now on can improve your DTI ratio significantly, potentially qualifying you for a better mortgage rate and potentially even a larger loan amount.

As we wrap up our blog, let’s talk about one important query first-time homebuyers have in their minds: “How much down payment money should I have to buy a house in Ajax?”

Well, it’s wise to put down at least 20% of the property’s price to avoid shouldering the private mortgage insurance (PMI) cost. Private mortgage insurance is an extra monthly fee you pay on a conventional mortgage if you put down less than 20% of the home’s purchase price as a down payment.

It basically protects the lender by insuring them against defaulting on the loan if you, the home buyer, can’t make your payments. The smaller your down payment on the MLS listing in Ajax, the higher the PMI rate.

So, as a first-time homebuyer, you can put anywhere between 5-20% of the home’s purchase price as a down payment. But be prepared to pay PMI costs for a down payment of less than 20%.

Remember, saving to buy your first house takes time. Don’t get discouraged and just try out the above strategies to quickly and successfully save for the down payment.