Do you ever think you’ll never be able to buy a house?
You’re not alone.
Raising the down payment is the most difficult part for the first time home buyer. Climbing house prices only make the joy of home ownership seem even more impossible. With the average house price in Manitoba hovering around $250,000, a 5% down payment of $12,500 can feel unattainable.
Some are lucky enough to have the down payment gifted to them by family, though it robs them of the joy of accomplishing it on their own, and they never develop the financial skills it takes to earn it. (… so I’m not sure how lucky they really are)
For most though, the down payment must be worked for. And it’s tough. (That’s why there are so many rentals!)
If you’re one of the many who struggle with even believing the joy of home ownership is possible for you, I have some good news.
These three little-known secrets will propel you toward that down payment faster than you though possible. Ready?
Pay your bills on time.
It doesn’t sound like much, but paying bills is not a private matter. Late payments and arrears affect your credit rating. The bank who will one day fund your home purchase will look at your bill payment history to see if you’re able to pay on time every time. If you are, they are much more likely to give you a mortgage – another bill to pay – and trust you to pay it back.
It might sound weird, but it takes money to borrow money. In decades past, a person without debt was seen as a wise financial steward. That is no longer the case. These days, a person who has never borrowed money looks to be incapable of managing debt, so why would anyone lend to them? It’s one of those chicken-egg conundrums. You can’t borrow if you don’t have debt, and you can’t have debt without borrowing.
The solution? Borrow small amounts of money – secured loans and credit cards are available – and then demonstrate your financial savvy by paying it off on time every time.
For the uninitiated, a secured loan would look like the bank using your car as collateral, or a credit card company keeping $500 of your cash in exchange for a $500 credit line. In that case, you’re essentially buying credit. Not to worry though, they return your cash once you’ve demonstrated you are trustworthy.
Save, But Just a Little.
Everyone knows a down payment needs to be saved up. But it doesn’t necessarily have to look like rice and beans sacrificial living, or getting a fourth job. (Though if you can hack that, power to you!)
For most, it’s unrealistic to expect that of ourselves. That’s why I’m a big fan of saving small. And there are a bunch of ways to do it.
Every time you break a dollar bill, keep the change in a jar. When the jar’s full, deposit it all in a separate down payment savings account.
Dedicate certain side income to your down payment fund. Garage sale proceeds, selling produce from your garden, overtime, tips, whatever extra you can skim off without really noticing, do it.
You can also skim on a schedule, having 5% of each check automatically deposited into your trusty savings account. Quick math: 5% of $40,000/year net earnings = $2000/year from that one effort alone.
Scotia Bank’s Bank The Rest® Program
If you are a Scotia Bank member, you have another option. In effort to help Canadians save more, they launched the Bank The Rest® savings program. This allows you to round up your purchases to the next multiple of $1 or $5 as you decide, and the difference is automatically transferred to your savings account.
You know how the interest on an overdue bill can add up quickly? If you combine all of these elements, the money starts adding up just as fast. We’re talking thousands of dollars in your account every year.
Before too long, you’ll be well on your way to a healthy down payment. As a bonus, along the way you will have increased your credit rating, and developed some killer financial skills that your peers will envy.
Yes, I know it will take time.
But how much more time will it take if you wait to start?
Yes, I know it will take work.
But let me ask you something: What worthwhile thing have you ever had that didn’t require work?
You must gain control over your money or the lack of it will forever control you.