| Buyers

Have you decided it’s time to take the big step and own your first home, but don’t know how to save for the down payment?

First off, let’s understand the difference between down payment and deposit because, yes, they are two different things and it’s important for you to know the difference in order to avoid confusion:

  • After placing an offer on your dream home, you’ll have to provide a deposit (certified cheque or bank draft) within 24 hours after the acceptance of your offer, otherwise, no deal!
  • While the money that you put down towards your mortgage (typically 5%-20% of the purchase price) is called a downpayment. The deposit becomes part of the downpayment once the sale closes. However, if the sale does not close due to buyer neglect, the deposit may be lost.So, make sure you do all your due diligence before.


Your down payment amount determines if you have a conventional mortgage or high-ratio mortgage.

If you have a high-ratio mortgage, you may be required to purchase mortgage default insurance usually through CMHC.

If your down payment is 20% or more of the purchase price, you’ll get a conventional mortgage and the bank will purchase the mortgage default insurance on your behalf. Wouldn’t that be great?

The insurance premium depends on the amount you’re borrowing and the percentage of your down payment. Premiums range from 0.6% to 4.5% of the mortgage amount. You can pay for the insurance upfront (most people don’t) or add it to your mortgage loan. Regardless of what you do, the HST on the premium must be paid on the closing date.


This is all great, BUT how do you save for a down payment?

Now that you know why it’s so important to save as much as you can for a down payment, here are a few tips to get you started on your way to homeownership!

  • Set a monthly savings goal and track your success.
  • Put aside money each month as if you’re paying a mortgage already.
  • Save your work bonuses, pay raises, tax refunds and side hustle earnings.
  • Pay with cash instead of credit cards; you’ll spend less overall. Trust us!
  • This one is hard, but reduce your spending on eating out and buying the latest gadgets and toys. We are guilty of this too!
  • Find cheaper ways of doing things such as taking staycations, trying to find Groupon deals for events and concerts, utilize the ton of free events in Toronto, especially during the summer, enjoy the waterfront and beautiful parks, try to buy things you need on sale.
  • Sell one of your cars and put the savings towards your down payment.
  • Pay off your credit card debt; stop paying interest!
  • Move home or in with a room mate or significant other to reduce your monthly housing costs.
  • If you’re having a hard time with the above, meet with a financial planner, but not just anyone, we highly recommend Shannon Simmons from the New School Of Finance, why?
  1. They are fee-only financial advice gurus, which means they are NOT trying to sell you financial products – like debt consolidation, mutual funds or their services.
  2. They deal with REAL people everyday.
  3. Their DIY life event courses on financial planning are accessible, affordable and awesome – take it at your own pace!


Want to know other ways to save up for your down payment, understand the entire buying process in detail and know what the newest incentives are for first time buyers? We have written a FREE report to help you out during your journey without having to sell your soul.

Request it here!


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