Quick tips for first-time home buyers

How to save for your down payment

Shopping for and buying your first new home is an exciting time, but first things first – you’re going to need a down payment before you start house-hunting.

You may be considering when – and how – to get into the pricey local real estate market. It can be a daunting prospect if you’re trying to save for a down payment, juggle your day-to-day expenses, and still enjoy your life in the meantime.

Here are a few down payment tips to consider if you are saving for your first home:

Start saving for your down payment as early as possible

Ideally you’re looking to be able to put 20% of the purchase price down to avoid having to pay for mortgage insurance, but with the cost of housing in Metro Vancouver, the Lower Mainland, and BC's South Coast, this is challenging.

Use our mortgage calculator to help you land on a purchase goal amount. Consider setting aside tax refunds and any work bonuses, and set up an automatic savings plan to help you reach your goal. If you’d like help setting this up or deciding what savings or investment product to use, just contact us.

Start a First Home Savings Account (FHSA)

Introduced in 2023, the First Home Savings Account (FHSA) offers Canadian residents a tax-sheltered way to save for a first home purchase through a registered savings plan similar to the RRSP and TFSA. The plan allows up to $8,000 in annual tax-deductible contributions to a maximum $40,000 lifetime tax-deductible contribution limit over 15 years of tax-free savings.

Know your down payment requirements

There are rules around the minimum down payment you can make. For a condo that costs $500,000 or less (relatively few in our region), it’s 5% down; for those costing $500,000 - $999,999 you’ll need 5% down on the first $500,000 and 10% of the remainder. For a property worth $1million or more, you’ll need 20%.

Use the Home Buyers’ Plan

If you have an RRSP, the Home Buyers’ Plan is an important option to keep in mind. It lets you withdraw up to $60,000 from your RRSP to put toward your down payment without having it considered as taxable income. The money you withdraw is considered a “loan” from your RRSP – you have to replace it within 15 years (with a 5-year extended grace period depending on when you took out the funds).

Confirm if your parents are going to help out

Since you’d need to have saved $100,000 to have a 20% down payment on a $500,000 condo, that’s a lofty, and hard to achieve, goal. The vast majority of first-time buyers in Metro Vancouver are getting some help from parents – normally anywhere between 25%-50% of the down payment. If you do expect to have help from your parents, have them complete a gift letter for you and the lender’s records.

Safeguard your credit score

When you apply for a mortgage, your credit score is a key factor in determining whether you are approved. It will also help determine your interest rate and loan terms. If you need to, correct any weak spots such as late or unpaid bills, and getting too close to your credit limits. Also, avoid opening any new credit accounts such as a credit card or car loan. Check your score before you look to get pre-approved.