The Costs of Covid – don’t let temporary financial setbacks stand in the way of owning your own home

The medical experts and the politicians are now firmly in agreement. There is no disputing that the virus that shut down most of the globe in the Spring has not gone away. We are facing the second stage of this unprecedented pandemic. As we made our way outside to enjoy the summer, the virus began to take advantage once again. Reminding us that there is still a road that lies ahead before this pandemic is finally in our rear view mirrors. Financial setbacks are open us.

It is also undeniably that the pandemic has stretched us all financially. Has the pandemic affected your pocketbook?. Are you reigning in household expenditures? Maybe you have even put plans for big purchases on hold for the foreseeable future. 

While this is understandable and a prudent response to an economically challenging time, there still remains avenues open to keep working towards your financial goals. If owning your own home is high on your list of financial goals, there are ways to reach this goal even during these unpredictable financial setbacks we all face currently.

 

How do you think your Grandparents dealt with financial setbacks?

Ok. You may have multiple credit cards, personal lines of credit or loans. Today, most people do. This is not to say that having credit and using it wisely is a bad thing. It is however not cash in hand, or money in the bank.

Saving the old fashioned way is still a very prudent way to reach your goal of buying a home sooner. The more you put away for a down payment, the more affordable your home purchase will ultimately be. In fact, The Canadian Mortgage and Housing Corporation does not feel it is necessary to insure a mortgage if the buyer puts more than Twenty percent of the mortgage cost down when closing. This percentage of down payment is considered enough for a low risk or secure loan in other words.

Don’t despair and close your laptop! You are not required to put down Twenty percent of the mortgage in the form of a down payment. You can put down as little as Five percent. You will have to pay an insurance premium on this mortgage loan, but overall the cost is rolled into the mortgage and is not a sizeable expense.

Now that you have relaxed a little, you may be wondering how you will be able to save when maybe your hours have been reduced during the pandemic or you were temporarily laid off and relying on less than your normal income. This question is easily answered with the following tips:

  1. Walk instead of drive to get light groceries or when manageable. This will save on gas. Money you can put towards a down payment.
  2. Consider buying consignment. There are great clothing options available and household items are perfectly adequate at a fraction of the price they are in the big department stores.
  3. Make your dinners at home!! Yes with the stress of Covid, it might be tempting to go to the drive through. Dont!  Although it may seem inexpensive at the time, these drive through options add up. If you went just three times a week at lets say 20 dollars each visit, this represents 60 dollars a week. Per month this comes to 240 dollars. Per year this amounts to nearly 3000 dollars a year!! Money that could go towards your down payment
  4. Stick to at home entertainment. The movie theatres did reopen this summer, but this does not mean that you need to spend Seventy-Five dollars to go see a film once you pay for parking and popcorn. Pop your popcorn over the stove and sit down with friends at home with Netflix. Entertainment at home is just as fun- try a game night- it is free!!
  5. Stop buying lunches and coffees!. The savings in packing your own lunches and skipping the pricey cafe lattes at Starbucks goes a long way. Money you can put towards your down payment savings even in economically unstable times.
  6. Set up an account to put these extra savings into and don’t touch the account! Consider setting up an automatic debit of say Ten percent of your pay cheque into this account each month to boost your overall down payment savings

 

The Government can help out too

Saving on your own is vital when trying to reach your down payment goals. There is also help to be had from the Federal Government when trying to reach your goal of home ownership.

  1. RRSP without penalty. Up to Thirty-Five thousand dollars can be withdrawn from your RRSP without a penalty! As a couple this could add up to Seventy Thousand dollars if both draw to the maximum amount allowable.
  2. The First Time Home Buyers Program. We have written in depth on this Federal Government program in a previous article in our news and articles section. In a nutshell, one of the attractive features of this relatively new Government initiative is that if you qualify as a first time home buyer ( See Is the First Time Home Buyers Program Right For You to see if you qualify) then the Government will match whatever down payment you have been able to come up with. 

 

You will only need to pay back the Government’s stake in your mortgage loan at the end of the mortgage term, or when you wish to sell, in the form of sharing the equity for the portion that was matched at the start of your loan. This in effect doubles the amount of your down payment and as a result lowers the amount of the overall mortgage loan.

 

Buckle down and take these tips to heart, anyone can come back from financial setbacks.

The age old saying “when there is a will there’s a way” applies very nicely to your quest to meet your down payment goals. There are many ways to pull in the purse strings and direct any additional money towards a down payment. 

It does take sacrifice (something our grandparents just understood) and it does take discipline. It is very possible, by reducing any discretionary spending and utilizing programs available, you can reach your down payment goals sooner than you think. Hold tight to your dream of buying a house and take all the necessary and prudent steps to get there.

For more information on how to navigate the pandemic together, see here.

If you would like to speak with one of our agents directly, you can book an appointment here.