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

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

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

“We have to make a call out to address this now so our people don’t have to feel fearful,” said Tribal Chief Mina Holmes. (Carrier Sekani Tribal Council Facebook photo)
Carrier Sekani Tribal Council seeks Indigenous-led task force in northern B.C. hospitals

Request made in an open letter to federal minister Carolyn Bennett

NDP headquarters on election night, Oct. 24, 2020. (Katya Slepian/Black Press Media)
ELECTION 2020: Live blog from B.C. party headquarters

BC NDP projected to win majority government – but celebrations will look different this election

Jennifer Rice BC NDP North Coast Incumbent was re-elected for a third according to the preliminary results on election night, Oct. 24, 2020. (Photo: K-J Millar/The Northern View)
Jennifer Rice is North Coast MLA for third term

Preliminary election results show NDP Majority government

B.C. Green Party leader Sonia Furstenau outlines her party's climate action platform at Nanaimo's Vancouver Island Conference Centre earlier this month. (News Bulletin file photo)
Green leader Furstenau declared victor in her home riding on Vancouver Island

Cowichan Valley voters elect freshly minted party leader for her second term

Over the years, Janice Blackie-Goodine’s home in Summerland has featured elaborate Halloween displays and decorations each October. (File photo)
QUIZ: How much do you really know about Halloween?

Oct. 31 is a night of frights. How much do you know about Halloween customs and traditions?

FILE - In this Jan. 23, 1987 file photo, actor Sean Connery holds a rose in his hand as he talks about his new movie “The Name of the Rose” at a news conference in London. Scottish actor Sean Connery, considered by many to have been the best James Bond, has died aged 90, according to an announcement from his family. (AP Photo/Gerald Penny, File)
Actor Sean Connery, the ‘original’ James Bond, dies at 90

Oscar-winner was knighted by Queen Elizabeth II in 2000

This house at 414 Royal Ave. became notorious for its residents’ and visitors’ penchant for attracting police. It was also the site of a gruesome torture in August 2018. It was demolished in 2019. KTW
6-year sentence for Kamloops man who helped carve ‘rat’ into flesh of fellow gang member

Ricky Dennis was one of three men involved in the August 2018 attack

Cpl. Nathan Berze, media officer for the Mission RCMP, giving an update on the investigation at 11:30 a.m., Oct. 30. Patrick Penner photo.
VIDEO: Prisoner convicted of first-degree murder still at large from Mission Institution

When 10 p.m. count was conducted, staff discovered Roderick Muchikekwanape had disappeared

Among the pumpkin carvings created this year by Rick Chong of Abbotsford is this tribute to fallen officer Cont. Allan Young.
Abbotsford pumpkin carver’s creations include fallen police officer

Rick Chong carves and displays 30 pumpkins every year

An online fundraising campaign in support of the six-year-old boy, Edgar Colby, who was hit by a car on Range Road Oct. 25 has raised more than $62,000 in a day. (Submitted)
$62K raised in 1 day for boy in coma at BC Children’s after being hit by vehicle in Yukon

The boy’s aunt says the family is “very grateful” for the support they’ve received from the community

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Health care employees take extensive precautions when working with people infected or suspected of having COVID-19. THE CANADIAN PRESS/Chris Young
WorkSafeBC disallows majority of COVID-19 job injury claims

Health care, social services employees filing the most claims

Conservative leader Erin O’Toole rises during Question Period in the House of Commons in Ottawa on Wednesday October 28, 2020. (Adrian Wyld/The Canadian Press)
Conversion therapy ban gets approval in principle, exposes Conservative divisions

Erin O’Toole himself voted in favour of the bill, as did most Conservative MPs

Most Read