A down payment is typically between 10-20% of the purchase price. Of course, the more you can pay upfront the better, but most buyers in the GTA aim for at least 10%. To reach your down payment goal quickly, here are some options with respect to investing your money.
Remember, this is for people who are comfortable with investing, have the knowledge to successfully navigate the world, or have someone they trust—like a broker—to guide them. It is not recommended to ever risk your money to grow it.
Where can you invest your money to build a down payment to get the mortgage you want?
High-Interest Savings Account
A high-interest savings account from any of the popular institutions is one of the better and more common places for people to grow their down payment. Granted, it stretches the definition of the word, “investment”, but your money can grow and be secure.
Most banks allow you to set up automatic deposits, making savings easier.
Guaranteed Investment Certificate (GIC)
A GIC offers a guaranteed safe return so there is no risk involved. You know the return will be limited but if you are only looking to raise the last little bit of your down payment then a GIC could make sense.
There’s another downside besides the low return. If you pull your money too early you could be forced to pay a fine.
This is the one that first-time homebuyers should consider.
RRSPs is usually viewed as part of a retirement savings plan. While your money won’t necessarily grow, it can help you in other ways. Canadian residents who are buying a property for the first time can take advantage of the Home Buyers’ Plan, which allows you to withdraw up to $25,000 from a RRSP tax-free. If there are two people who are buying the home, then each can use the plan to withdraw up to $50,000.
Remember, you must repay the withdrawn amount within 15 years.
Saving is never easy. Even if the property is fairly prices, a down payment will be a lot of money. You need to be prudent and save diligently.
Contact us to discuss your down payment or to start the pre-approval process.