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

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

Just Posted

Peter Flynn sits at the piano at a Christmas concert. Flynn retired at the end of 2020 and sat down with The Standard to reflect on his long career in the Hope area. (Photo/Peter Flynn)
EXTENDED INTERVIEW: Coquihalla’s longtime elementary school teacher retires

Peter Flynn reflects on decades as a teacher in Hope, teaching at school he went to as a child

Two teens were sent to hospital after being stabbed Saturday evening. (Shane MacKichan photo)
Two teens stabbed in Abbotsford

20-year-old man has been detained

Police tape is shown in Toronto Tuesday, May 2, 2017. (Graeme Roy/The Canadian Press)
CRIME STOPPERS: ‘Most wanted’ for the week of Feb. 28

Crime Stoppers’ weekly list based on information provided by police investigators

Alina Durham, mother of Shaelene Bell, lights candles on behalf of Bell’s two sons during a vigil on Saturday, Feb. 27, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO and PHOTOS: Candlelight vigil for Shaelene Bell of Chilliwack sends message of hope

Small group of family, friends gathered to shine light for 23-year-old mother missing for four weeks

A health worker holds a vial of AstraZeneca vaccine to be administered to members of the police at a COVID-19 vaccination center in Mainz, Germany, Thursday, Feb. 25, 2021. The federal state of Rhineland-Palatinate, start with the vaccination of police officers in internal police vaccination centers. (Andreas Arnold/dpa via AP)
B.C. officials to unveil new details of COVID vaccination plan Monday

Seniors and health-care workers who haven’t gotten their shot are next on the list

An investigation is underway after a man was shot and killed by Tofino RCMP in Opitsaht. (Black Press Media file photo)
Man shot and killed by RCMP near Tofino, police watchdog investigating

Investigation underway by Independent Investigations Office of British Columbia.

Baldy Mountain Resort was shut down on Saturday after a fatal workplace accident. (Baldy Mountain picture)
Jasmine and Gwen Donaldson are part of the CAT team working to reduce stigma for marginalized groups in Campbell River. Photo by Marc Kitteringham, Campbell River Mirror
Jasmine’s story: Stigma can be the hardest hurdle for those overcoming addiction

Recovering B.C. addict says welcome, connection and community key for rebuilding after drug habit

A Vancouver restaurant owner was found guilty of violating B.C.’s Human Rights Code by discriminating against customers on the basis of their race. (Pixabay)
Vancouver restaurant owner ordered to pay $4,000 to customers after racist remark

Referring to patrons as ‘you Arabs’ constitutes discrimination under B.C.’s Human Rights Code, ruling deems

Judith Uwamahoro is Black, approximately 4’7″ tall, 80 pounds and has short black hair and brown eyes. (Surrey RCMP handout)
UPDATED: Lower Mainland 9-year-old located after police make public plea

Judith Uwamahoro went missing Friday at around 4 p.m. in Surrey

Five-year-old Nancy Murphy wears a full mask and face shield as she waits in line for her kindergarten class to enter school during the COVID-19 pandemic on Tuesday, September 15, 2020. THE CANADIAN PRESS/Nathan Denette
Variant of concern linked to COVID-19 outbreak at three Surrey schools

Cases appear to be linked to community transmissions, but schools will remain open

Nanaimo children’s author and illustrator Lindsay Ford’s latest book is ‘Science Girl.’ (Photo courtesy Lindsay Ford)
B.C. children’s writer encourages girls to pursue the sciences in new book

Lindsay Ford is holding a virtual launch for latest book, ‘Science Girl’

Most Read