How to Adult

*Are you having troubles saving money??

*Does having extra funds in your bank account make you feel like you need to spend it right away??

There are a couple tips on how to use your money in different ways to save for a down payment:

1. If this is your first home, you could start a RRSP, perks of moving your savings into an RRSP is you get a tax deduction and your money collects interest. If you don’t see the funds in your bank account you are less likely to spend them. Using the first time home buyer current rule, you are able to take money out of your RRSP to use for your down payment and do not have to pay taxes on those funds. You have 5 years to pay back the money you took from your RRSP, if you do not pay back all of the money within 5 years, you will just have to pay taxes on the amount left owing.

Example: If you take out $20,000 and couldn’t pay back any of it… you would have to pay taxes on $20,000. If you took out $20,000 and only paid back $10,000 you would have to pay taxes on $10,000, as if you made an extra $10,000 of income that year.

2. You could put your money in another type of investment like TFSA (tax free savings account). The way TFSA works is you can deposit lump sums or your financial advisor can withdrawal monthly payments of the amount of your choosing. Then just like many other types of investments you can choose how risky or safe you want to be. The higher the risk the faster you could make money however keep in mind the higher the risk, also the higher chance on your money can decrease as well so it is always a good idea to go over your options with your financial advisor. Financial advisor’s aren’t just for the rich anymore. I am a firm believer that everyone should have a financial advisor. An advisor can look at your short term and long-term goals and help position your finances for success. Also it is important to note there are a lot of tax benefits with a TFSA.

3. There is also another option that can help you build your credit score as well as save for a down payment. It is called a secured loan although I am sure most banks offer this program I am most familiar with the secured loan from Refresh Financial. If you are an individual that has a low credit score (lower than 650) or are currently looking at rebuilding your credit this might be the best option for you. With this secured loan it is like having an extra loan payment. When setting up this loan you choose if you want a 1 year or 2 year term, then your payments (monthly or biweekly) consists of your principle amount and the interest. One major thing to keep in mind is with a secured loan is the amount of interest charged by the bank. Unfortunately the bank still has to make money so they will charge you interest for this service. The principle amount of the loan then becomes your part of your down payment.

4. Refinancing your vehicle- Depending on what year and how much you have paid down on your vehicle you could use that money for your down payment. I have helped previous clients rewrite their vehicle loan to give them enough money for a down payment.

5.If you have an immediate family member that can gift you the down payment that could be an option as well.

6. If you have 5% down payment from your own savings or any of the options we have already talked about you may be eligible for the FTHBI (First time Home Buyers Incentive) which be an extra 5% or 10% down. Some of my clients have used this incentive to keep their payments low or to qualify for a more expensive house. Just keep in mind, that when it comes to selling the house the government takes 5% or 10% of the purchase price. With the new FTHBI rule change the government can only take 5% or 10% of the purchase price if your house’s value increased by 8% or less. However if your house value increases by more than 8% annually the government is no longer eligible for that extra value.