Saving money for a down payment on a home has always required discipline, patience, and hard work. There’s nothing new to report there – except that in highly-inflated real estate markets such as Vancouver you need to develop these virtues early, and exercise them for most of your adult life. Here is the hard-cold truth – despite significant drops and levelling off over the past few years, as of November 2019, the median price of a detached Vancouver dwelling is still a whopping $880,000.
The Hard Numbers
Canadian lenders typically require a down payment equal to 5% of the first $500,000 plus 10% of the next $500,000 and 20% for any sum in excess of $1,000,000. For that median-priced Vancouver home valued at $880,000, you would need to amass a minimum down payment of $65,000 and be saddled with a mortgage of $815,000 plus closing costs. This is all fine if you can qualify for and afford the monthly payments on such a huge debt, but let’s face the reality that most people simply cannot.
Of course, the simplest way to reduce your mortgage debt is to put more money down at closing. Here’s where the need for extreme saving comes into play. In addition to discipline and hard work, today’s buyers are being forced to come up with new and imaginative ways of penny-pinching their way to homeownership. Here are a few creative approaches employed by young buyers in search of a home to call their own. As you will see, the common thread here is sacrifice – and lots of it.
Extreme Saving Tips:
Temporary Suspension of Housing Costs
You must live somewhere, but who says it must cost you? Extreme savers don’t just cut out frozen lattes and fancy gym memberships. They look to reduce or eliminate large expenses also and rent is often at the top of the list. If possible, consider moving in with your parents or grandparents or someone who really loves you (really, really loves you) enough to offer a rent-free year or two in exchange for chores around the house and the sheer pleasure of your company. This will undoubtedly work out fine for some relationships, and not so well in others, but in the end, finding a way to live rent-free would be a huge cost-savings toward a down payment.
Sell Your Car
In getting rid of a car, you will dump car lease or loan payments, insurance, maintenance and fuel costs all at once, while significantly reducing your carbon footprint. If you can make mass transportation, carpooling, car sharing, Uber, Lyft or cycling work for you – go for it. If Uber ever makes it to Vancouver that is.
Take on a Side Hustle
Everyone is doing it – working two and even three jobs to make ends meet. Look at your talents and qualifications to see what might work best for you – driving, freelance writing or fast food. If you’re willing to give up your time not spent at a full-time job, and your skills lend themselves to something part-time, this is another way to inch your way towards homeownership.
Nix Your Entertainment Budget
We’re not just talking about kicking any shopping habits or daily Starbucks visits. Saving for a down payment on an average income will require spending as little as possible on non-essential items – eating out, concerts, drinks with friends, movies, plays, cable, holidays, weekend getaways, new electronics, etc. If you really want to scrape everything together, unfortunately, you have to live a financially conservative lifestyle.
How to Own Without Sacrifice
If you feel you are ready to make these sacrifices, and make them as soon as possible, you may be able to carve a path for yourself towards traditional homeownership. But the reality is, not only is this a less than desirable way to live, it isn’t an option for everyone. Parents or people with dependents may not be able to spend all their time away from home, at second jobs. They need to be home to care for those that need them. And frankly, not everyone is able to push the limits of exhaustion to provide, or may even suffer from ailments that limit the number of hours they’re able to spend toiling. Luckily traditional homeownership isn’t the only means to becoming a homeowner.
addy is reinventing what it means to be a homeowner. You don’t need to own 100% of a property to get into the market. With addy, you can own parts of many different properties and invest in real estate with an amount that fits your budget – no life-altering sacrifices required. Even more importantly, co-ownership in a property with other young investors and experts from the addy team lets you experience the pride and benefits of homeownership without taking on crushing mortgage debt.