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Saving for a Down Payment: Developing a Strategy

Written by Vicky Payeur

Wednesday, January 29th, 2020

Buying a home is a major goal for many people and is often associated with freedom and comfort.

But since moving to Montreal, I've noticed that buying a home is more complicated than it was when I lived in a smaller city. It may even be an unattainable goal, especially for someone in their mid-twenties, earning an entry-level salary.

Real estate prices in this city have risen faster than wages, and demand for homes has exploded. After a year of looking to buy a house in Montreal, I came to the realization that I'd have to leave the city in order to get a mortgage for a modest home.

That said, whether you're aiming for a 5% down payment to get into the market or a 20% down payment required to avoid paying for mortgage default insurance, you still need to save several thousand dollars in order to reduce your monthly payments as much as possible. To make that happen, I've devised a few savings strategies to help me save as much as possible so I can buy a home as soon as possible.

Save a Monthly Amount Equal to the Cost of Your Expected Mortgage Payment

This strategy mimics, in real time, the day-to-day expenses that come with a home. The money set aside can go into an RSP to take advantage of the Home Buyers' Plan when you're ready to buy, or it can be set aside in a TSFA.

For example, if you're currently paying $600 a month for all-inclusive rent, and you expect your mortgage to cost you $1,000 a month, you'd put aside the difference, or $400, each month. Personally, I deposit that amount into a savings account earmarked for our down payment. On top of that, I like to add at least $200 to factor in any additional costs.

This way, you can review your budget and be financially prepared to live with a mortgage, not to mention the other expenses associated with owning a home.

Avoid Surprises: Save Enough to Cover Closing and Other Costs

I found out this year that you have to pay between $6,000 and $10,000 in fees when buying a property. These include legal or notary fees, land transfer taxes, home inspection and appraisal fees, additional taxes and other fees that can quickly add up and must be paid within the first few weeks of the purchase. It's a significant amount that you'll want to factor into your savings strategy.

To prepare for this, I opened a savings account and deposited about $200 every month. In two years, when we hope to buy, I'll have saved almost $5,000, which should be enough to cover about half of those initial costs.

Set Aside Savings for Upgrades

I love interior design. But my inner minimalist is keen to wait until we buy the house before we replace all the student furniture and other items we've accumulated over the years.

I haven't bought any new decorative items for over a year. The money saved will help ensure that I have enough money saved up for new furniture and other household items when we move in.

It's Never too Late to Start

In a nutshell, it's always smart to start saving for a down payment on a house, no matter what your life stage. Set goals and adopt a strategy that works for you – you'll be amazed by what you can accomplish.


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