How to Save for a Down Payment: Start By Setting Reasonable Expectations

How to Save for a Down Payment This morning, I was catching up on reading and came across this great blog post on the Troubled Future of Real Estate from the ever thought-provoking Garth Turner.* He discusses the trend of individuals using revolving credit to pay for rents – note: seriously bad idea – as well as the desire of many Canadians to receive government assistance in their efforts to come up with down payment money.

I don’t always agree with Turner’s point of view, but then again… I often do. And for me, his points on first-time buyer mindset are bang-on.

Yes, it is incredibly difficult to save even 5% for a down payment (plus closing costs… let’s not forget those.) But you know what… it can be done. I work with a lot of first-time home buyers. The ones I see actually getting out of the rent trap and into home ownership (vs. looking endlessly for the perfect home at a bargain-basement price) typically tend to have a few of the following characteristics:

  • They don’t “want it all”. They have reasonable expectations about how far their real estate dollar will take them in Guelph. And yes, it can be a little disappointing at times.
  • They don’t feel the need to go to to the upper limit of their likely-already-stretched mortgage pre-approval.
  • They aren’t obsessed with frivolous things like high-end appliances. They know those can be added in time. Or not. Instead, they focus on the home’s bones, mechanics, and potential to rise in value via sweat equity, etc.
  • They actually “get” the concept of the property ladder. They aren’t looking to start out in a “forever home” but rather accept that a first home is merely a starting point. They look at reasonably-sized, reasonably-priced homes (or townhomes or semis) that are typically situated outside of the city’s most premium neigbhbourhoods.

And so forth. You get the idea.

Yes, saving for a down payment is tough. Been there! But it’s a lot easier if your expectations as a buyer are realistic. Often the people complaining the most about how hard it is to get into home ownership are the same folks looking to “have it all” in their first home. As it happens, saving 5% down for a starter home is still going to take serious planning and likely come at the price of plenty of “extras” being pulled from your budget. But it sure is easier to save for a good place to start vs. saving for a shiny, big McHome with stainless steel appliances.

*Yes, I know he despises real estate agents, but I value his insights and, damnit, I can’t help but like him.


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