Saving for a down payment on your first home takes a careful plan

Financial consumer agency says minimum is 5% of purchase price if you plan to spend $500,000 or less

Krystal Yee poses for a photograph in Vancouver, on Monday October 28, 2019. THE CANADIAN PRESS/Darryl Dyck

Krystal Yee poses for a photograph in Vancouver, on Monday October 28, 2019. THE CANADIAN PRESS/Darryl Dyck

When Krystal Yee finished college and entered the workforce, she set a goal much like many other graduates: find a way to save enough to buy a home.

Yee, who lives in Vancouver, said her career in marketing and as a personal finance blogger were only landing her an average of $44,000 a year.

The benchmark price for a detached property in Vancouver was $901,680 at the time and apartments were going for about $405,200.

Yee didn’t let the conditions intimidate her. She crafted a plan and in 2011, at the age of 28, nabbed a one-bedroom townhouse about 25 minutes from Vancouver’s downtown core in New Westminster.

The first step Yee took was working out how much she would need to save for a down payment. She used listings and the local real estate board to learn about average home prices and then turned to a series of online calculators to help her calculate how much cash to stash.

The Financial Consumer Agency of Canada says the minimum amount you’ll need to save for a down payment if you plan to spend $500,000 or less on a home is five per cent of the purchase price.

If the home you want to buy costs between $500,000 and $1 million, the agency says to save five per cent of the first $500,000 of the purchase price and 10 per cent for the portion above $500,000.

If you intend on shelling out more than $1 million, use 20 per cent as your ballpark savings rate, the agency recommends. It also warns that if you’re self-employed or have a poor credit history, you may be required to provide a larger down payment.

Before you even consider buying a home, Yee says it’s important to manage your debt. When she was thinking of purchasing a place, she had $20,000 in debt, so she started living even more frugally and taking on gigs whenever she could.

“I did that through working two full-time jobs and a bunch of part-time jobs and really made that my focus,” she said.

Some of the work was unglamorous, she admits, and only paid between $8 and $10 an hour, but it added up and within a year, she was debt-free. Looking for freelance work and selling odds and ends online helped too.

Savers may also be lucky enough to receive help from family members.

“I personally didn’t get any help with my down payment, but if my parents had offered, I probably wouldn’t have said no, but I also don’t think that it should be expected,” she said.

Yee used a method that she calls “building your budget backwards.”

She worked out that she wanted to buy a home within three to five years and divided up the cost of her ideal home to calculate what she thought she could save every month. Then, she subtracted the monthly rate from her budget before calculating how much she’d spend on rent, bills, groceries and other things.

Some people, she said, might do this calculation and realize they don’t have enough to live on.

If that happens to you, she said you must decide whether to save at a slower rate, look at more affordable homes or in areas like suburbs where prices can be lower, or find ways to increase your earnings.

“Some months I made that goal and some months I didn’t,” she admitted.

READ MORE: Trudeau promises added incentives for first-time home buyers

READ MORE: Conservatives’ plan to ease mortgage stress-test rules may raise debt and prices

Yee recommends anyone looking at saving for their first down payment take advantage of the home buyer’s plan, which allows you to withdraw up to $35,000 from your registered retirement savings plan to buy or build a home and gives you 15 years to repay the amount you took out.

She used the plan in connection with her tax returns to build up a stash of cash — and it’s a method she suggests others mimic.

“All the money I was saving for my down payment, I would put into my RRSPs, and then with the tax return, I would reinvest in my RRSPs,” she said.

Tara Deschamps, The Canadian Press

Like us on Facebook and follow us on Twitter

Just Posted

Brenda and Steve Smith with a photo of Derek Descoteau. It’s been five years since Derek was murdered in Chemainus. (Photo by Don Bodger)
Friends provide continuing comfort for family in wake of unresolved Chemainus murder

Case remains before the courts five years after Derek Descoteau’s abrupt stabbing death in Chemainus

RCMP. (Phil McLachlan - Black Press Media)
Shawnigan RCMP wrap up investigation into ‘suspicious occurrence’

Police and complainant satisfied with explanation

More “strings of lights” were seen on May 15, 2021, in night sky over Vancouver Island. (File photo)
COVID-19 virus (file photo).
Possible COVID-19 exposure reported at Mill Bay Thrifty Foods

Employee tested positive, last worked on May 8

The former St. Joseph’s School converted to the St. Joseph’s Art Studios in 2019. (File photo by Don Bodger)
Former Chemainus St. Joseph’s School site sold to addictions recovery group

Diocese stresses the importance of a community outreach option in its decision

A prowling coyote proved no match for a stray black cat who chased it out of a Port Moody parking lot Friday, May 14. (Twitter/Screen grab)
VIDEO: Little but fierce: Cat spotted chasing off coyote by Port Moody police

The black cat is seen jumping out from under a parked car and running the wild animal out of a vacant lot

Troy Patterson, a Cadboro Bay 15-year-old, got a virtual meeting with B.C.’s environment minister months after he started an online petition calling for construction of the Coastal GasLink pipeline to stop. (Jake Romphf/News Staff)
B.C. teen’s 23,000-name Coastal GasLink petition gets him an audience with the minister

15-year-old Saanich high school student and George Heyman discussed project for about 30 minutes

Victoria police responded to a vehicle where this dog was found in distress due to the heat after being left inside. (Photo courtesy of VicPD)
Two Victoria distress calls a reminder that hot cars can be fatal to dogs left inside

Victoria police found two dogs in a car with an internal temperature of 47 C on Friday

A game camera near the Klahoose reservation on Cortes Island caught this glimpse of a truck leaving the woodlot at around 2:30 on Sunday morning. Photo supplied by Klahoose First Nation
Indigenous cutblock vandalised on Cortes Island, anti-logging element suspected

Ribbons pulled down, gravel poured into gas tank at Klahoose First Nation site

Announced Tuesday, May 18 by Public Safety Minister Mike Farnworth, the province added gyms, dance and fitness studios to its list of places where face coverings are mandatory (AP/Steven Senne)
Masks now required at all times inside B.C. gyms, including during workouts

Those who disobey could be subject to a $230 fine

Reinhard “Bud” Loewen of Abbotsford has now been charged with 21 counts of sexual assault related to his massage business. (Facebook photo)
Former Abbotsford masseur now faces 21 counts of sexual assault

Bud Loewen of Bud’s Massage Therapy initally faced three charges

Over the years, police have worked with sketch artists to draw what the boys could have looked like at the times of their deaths. (Vancouver Police Department)
DNA breakthrough expected in cold case involving murdered Vancouver boys, 7 and 8

Forensic analysts are working to identify relatives of the children, whose bodies were found in Stanley Park in 1953

Livestock competitions have been part of the Pacific National Exhibiton for more than a century. (Maple Ridge News files)
B.C. provides $50 million to keep major tourist attractions going

Tour bus companies also eligible for latest COVID-19 aid

The new wing at the Victoria International Airport opened up on Thursday (File contributed/YYJ)
Pandemic takes ‘hundreds of millions’ out of Victoria Airport, Vancouver Island economy

Airport authority head says passenger volumes down as much as 98 per cent

Most Read