Maybe you finally have some breathing room in your budget to start saving for your first home. Or you have already started saving and are now wondering how much longer it will take. Either way, you are in the right place. In this blog, we will explain how long it takes to save up for a home in Canada. Plus, we will explore how you can buy a house without having the minimum down payment saved up. There are many down payment assistance programs that can help you get the keys to your first home much sooner than you might think. Let’s learn about it all in detail!

The True Timeline – The Time Required to Save for a House in Canada

Affordable housing feels more like a thing of the past in Canada. Since the pandemic, we have seen home prices skyrocket significantly in the country – increasing by more than 30%. While home prices have somewhat stabilised in the past three years, the high interest rates have still kept homeownership out of reach for many. With this affordability crisis, the time it takes to save for a down payment has also significantly increased. On average, it takes about 8 years to save up for a minimum down payment in Canada. But that’s just a rough estimate. The actual time it will take you depends on several key factors 

1.Your home-buying budget 

The first thing to consider is how much you are planning to spend on your new home. The higher the purchase price, the higher the down payment, and hence, a longer saving period.

2.The down payment amount 

Are you planning to put down the minimum down payment? Or do you want to make a 20% down payment to avoid the CMHC insurance? The higher your down payment amount, the lower your mortgage payments will be, but it will take more time to save. 

3.Your monthly income and savings rate

The more you earn and the higher percentage you set aside each month, the faster you will reach your goal.

Let’s break this down with an example. Suppose –

• Your home-buying budget is $900K
• You are planning to put down the minimum down payment – $65,000
• Your annual income is $50,000
• And you are saving 15% of your income every year

At this saving rate, it would take you about 8 years and 8 months to save for the down payment. 

So, if you are hoping to become a homeowner down the line, you should start saving as early as possible. The earlier you start saving, the better position you will be in when you are ready to make that big move.

FYI – You Don’t Have to Wait Until You Have Saved the Full Down Payment

You don’t have to put off buying a home simply because you haven’t saved up the full down payment. As mentioned earlier, there are plenty of ways to speed up the saving process. One of the most popular options is the “down payment assistance program.” These programs give homebuyers like you a financial boost, making it easier for you to afford a home sooner than you expected. 

Down payment assistance programs are designed to help homebuyers cover part or all of their down payment. These programs come in different forms, such as grants, tax credits, rebates, or loans with favourable terms. 

Government Programs to Help with Your Down Payment

In Canada, several government programs can help you with your down payment. Some of the most common government programs are:

1.RRSP Home Buyer’s Plan (HBP)

Do you have funds saved in your Registered Retirement Savings Plan (RRSP)? If yes, you are in luck! The Home Buyer’s Plan lets first-time homebuyers withdraw up to $60,000 from their RRSP for a down payment. If you are buying a home with a qualifying partner, the total amount you can withdraw will be $1,200,000. The best part? You don’t have to pay tax on the money you withdraw if you pay it back within 15 years. 

2.Land Transfer Tax Rebate

Another program that can make affordable housing possible for you is the Land Transfer Tax Rebate. As a rule, you must pay a land transfer tax when you buy a home. This tax can add thousands of dollars to your closing costs. However, if you are a first-time homebuyer in Canada, you may be eligible for a land transfer tax rebate. This rebate can cover a significant portion of your land tax. In Ontario, first-time buyers can get up to $4,000 back. This tax rebate can free up more money that you can use for your down payment.

3.Tax-Free First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) is a special savings account that allows you to save up to $40,000 for your first home – completely tax-free. You can contribute up to $8,000 to this account per year. It is one of the best ways to grow your down payment faster.

Private Down Payment Assistance Programs

The government programs aren’t your only option for down payment assistance. Several private companies and organisations offer financial assistance as well. One example is the Tonsto Down Payment Assistance Program. Under this first-time buyer program, an eligible buyer can get up to $50,000 in cash before closing. This assistance is completely interest-free and doesn’t require you to give up equity in your home. 

However, not all assistance programs provided by private companies work the same way. Some require repayment with interest or even a shared equity agreement. So, before signing up for any assistance program, you must read the terms and ensure that it aligns with your financial situation. 

Key Takeaway – How Quickly You Save Your Down Payment Is Mostly in Your Hands

To sum it up, the time it takes to save for a down payment mostly depends on how proactive you are. If you start saving early and take advantage of assistance programs, you can buy a home sooner than you think. But if you are not consistent with your savings and are unwilling to use available assistance, it could take you forever to save. 

So, the real question is: Are you ready to take the first step toward your next home? If yes, create a savings plan, look into these down payment assistance programs, and watch your homeownership dream become a reality.