How to Save for a First Down Payment

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How to Save for a First Down Payment

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How to Save for a First Down Payment

Embarking on the journey to homeownership can be daunting, yet strategic savings make it attainable. This article distills invaluable insights from financial experts to guide readers through proven methods for accumulating a first down payment. Discover actionable steps to enhance savings efficiency, from automating deposits to embracing frugal living, all tailored to kickstart the path towards a dream home.

  • Automate Savings with High-Yield Account
  • Downsize Luxury Expenses for Savings
  • Invest in Low-Risk Strategies
  • Use Tax-Advantaged Accounts
  • Create a Dedicated Savings Account
  • Make and Stick to a Budget
  • Set Milestone Goals for Savings
  • Consider a Side Hustle
  • Allocate Unexpected Funds to Savings
  • Cut Unnecessary Subscriptions
  • Use Cash-Back Rewards for Savings
  • Start a Savings Challenge
  • Live Rent-Free with Family

Automate Savings with High-Yield Account

One tip that worked for me when saving for a down payment was automating my savings with a dedicated high-yield savings account labeled “Dream Home Fund.” Setting up an automatic transfer every payday ensured I stayed consistent without even thinking about it. I treated that fund like it was off-limits. It wasn’t just extra cash lying around; it was the future of my homeownership.

I also reviewed my monthly subscriptions and spending habits. Canceling services I rarely used and swapping out costly takeout nights for home-cooked meals made a surprisingly big difference over time. I even used cashback apps and rewards credit cards (responsibly, of course) to funnel additional savings into the fund.

Seeing the balance grow steadily was hugely motivating and helped me hit my target faster than expected. Automating your efforts and cutting unnecessary expenses, no matter how small, really add up when you stay consistent.

Inge Von AulockInge Von Aulock
Investor & Chief Wealth Builder, Invested Mom


Downsize Luxury Expenses for Savings

One helpful tip I’d give to first-time homebuyers is to downsize luxury expenses like dining out or subscription services, and put the money saved directly into your down payment fund. Cutting back on non-essentials makes a big difference and helps create a clear path toward your goal. I found this method to be effective since it helped me change my attention from short-term comforts to long-term savings. Once I saw the difference in my savings, it was easier to stay disciplined and motivated. It felt rewarding to watch my down payment fund grow as I refocused my spending.

Gary HemmingGary Hemming
Owner & Finance Director, ABC Finance


Invest in Low-Risk Strategies

Instead of retaining all of your money in cash, I would advise first-time homebuyers to invest in a low-risk strategy, such as bonds or index funds. If your down payment goal is a few years away, this approach helps your money grow faster than it would in a regular savings account.

It worked wonders for me because I was able to earn higher returns while taking on minimal risk. Compound interest played a big role in building my savings without requiring extra effort.

Over time, I watched my down payment fund grow, and it felt like my money was working for me. It’s a smart and hands-off way to boost your savings while preparing for such a big milestone.

Jeffrey ZhouJeffrey Zhou
CEO & Founder, Fig Loans


Use Tax-Advantaged Accounts

One financial tip I always share with first-time home buyers is to take full advantage of the First Home Savings Account (FHSA), Tax-Free Savings Account (TFSA), and Registered Retirement Savings Plan (RRSP). These accounts aren’t just for saving money—they can also grow your savings faster through smart investments.

For example, in an FHSA, your contributions are tax-deductible, and the growth and withdrawals for your first home are completely tax-free. Similarly, the RRSP’s Home Buyer’s Plan (HBP) allows you to borrow up to $35,000 without tax implications as long as it’s repaid within the required timeline. Pairing these accounts with investments that align with your timeline and risk tolerance can help your savings grow more quickly than leaving them in a traditional savings account.

To boost your progress, consider using your income tax refunds to fund these accounts each year. Since FHSA and RRSP contributions reduce your taxable income, the refunds you receive can create a cycle of compounding savings. Personally, this approach helped me reach my own home-buying goal much faster. I made consistent contributions, invested wisely within these accounts, and reinvested my tax refunds. I also took advantage of programs like the First-Time Home Buyer’s Tax Credit and local grants, which can provide an extra financial boost.

By combining these tools, you’re not just saving—you’re leveraging every available opportunity to grow your down payment and ease the transition into homeownership.

Chad HarmerChad Harmer
Founder, CIO, Real Estate Broker, and Financial Planner, Harmer Wealth Management


Create a Dedicated Savings Account

One financial tip I’d give to first-time home buyers is to create a dedicated savings account specifically for your down payment. This account should be separate from your regular spending or emergency funds. Automate a portion of your income to go directly into this account every month, even if it’s a small amount at first.

Such a strategy ensures consistency and reduces the temptation to dip into those savings for other expenses. Watching the balance grow over time can be incredibly motivating and provides a clear sense of progress. It also makes the process feel less overwhelming, as the goal is broken into manageable steps rather than saving a large sum all at once.

This approach works because it creates a clear boundary between your savings and daily spending while encouraging steady progress. It also makes the goal feel more tangible, which is key to staying focused on achieving it.

Fran CookeFran Cooke
Owner, All Financials


Make and Stick to a Budget

My financial advice for first-time homebuyers is to make a budget and stick to it. Although it might seem like simple advice, I promise you that it has a profound impact. I was intimidated by all the expenses when I first considered purchasing my first house. It seemed impossible for me to save enough money for the down payment and closing costs. At that point, I made the decision to sit down and make a budget.

I started by looking at my current spending and figuring out where I might make savings. I started by listing all of my monthly fixed costs, including groceries, utilities, and rent. I then examined my bank statements to find out where I was overspending and to observe my spending pattern. Seeing how much money I was spending on unnecessary expenses like eating out and impulsive shopping opened my eyes.

I created a reasonable monthly budget for myself after I got a firm grasp on my spending. Every month, I made sure to set aside a specific amount for savings. I was actively working toward my goal of saving for a down payment and taking charge of my money in this way. I also took care to stay within my spending limit and refrain from making any extra purchases.

In addition to saving me money, making and following a budget offered me peace of mind and a sense of control. Since I understood exactly where my money was going, the idea of buying a home no longer intimidated me.

Making a budget also helped me determine areas where I might be able to raise my income. In order to generate extra money for my savings, I took up freelance work and side gigs.

I would advise first-time homebuyers to make and stick to a budget. In the long run, it will be worthwhile, even though it might need some sacrifice and discipline. A well-defined budget will provide you with a clear path to becoming a homeowner. Take charge of your money now, and you’ll be on your way to buying your ideal home before you know it.

Grace ChisomGrace Chisom
Real Estate Expert, Designer and Stager, British Columbia Property Buyers


Set Milestone Goals for Savings

My best tip is to break down payment savings into smaller milestone goals. For example, set a goal to save $5,000, then $10,000, and so on, each time rewarding myself with a small, non-financial treat like a night out with friends or a favorite meal. These milestones keep you motivated and give a mental boost which needs to keep going, making the process feel more achievable.

This strategy helped me stay on track with saving for a down payment and eventually reaching my goal. I focused on one milestone at a time instead of feeling overwhelmed by the large amount needed for a down payment. Each milestone reached gave me a sense of accomplishment and kept me motivated to continue working toward my ultimate goal.

I found that rewarding myself with non-financial treats was a great way to stay motivated without compromising my savings. It’s important to find a balance between saving for your future and enjoying life in the present. I highly recommend this strategy to first-time home buyers as it can make the process of saving for a down payment more manageable and enjoyable.

Max AveryMax Avery
Chief Business Development Officer, Digital Family Office


Consider a Side Hustle

It can be a daunting task, especially with rising housing costs and other financial obligations. To save for a down payment, start by creating a budget to understand your finances and find areas to cut expenses. Set a clear, realistic savings goal with a timeline. Automate your savings with regular transfers to a dedicated account, and reduce unnecessary expenses like dining out or unused subscriptions to boost your progress.

But my top financial tip for first-time home buyers is to consider getting a side hustle or second job. This may seem overwhelming, but even a few extra hours per week can make a big difference in your savings. It could be a freelance job, part-time retail work, or even dog walking—anything that brings in additional income that can go towards your down payment.

Mike OtrantoMike Otranto
President of Aqusitions, Wake County Home Buyers


Allocate Unexpected Funds to Savings

A great tip for first-time homebuyers is to allocate any unexpected funds—like tax refunds, work bonuses, or gift money—directly to the down payment savings. This helped me avoid spending those extra funds on things I didn’t need and kept my savings focused. It allowed my down payment fund to grow faster and with less effort. The added bonus of using windfalls made reaching my goal feel much more achievable. Using those unexpected funds was a smart way to speed up the process without feeling the strain of regular income.

Adrian IorgaAdrian Iorga
Founder & President, Stairhopper Movers


Cut Unnecessary Subscriptions

One of the best moves I made when saving for a down payment was to cut out unnecessary subscriptions. It sounds simple, but you’d be surprised how much those little expenses can add up over time. I spent a weekend going through my bank statements, checking for anything I wasn’t actively using—things like streaming services, gym memberships, or even magazine subscriptions. It didn’t seem like much at first, but trimming out even $50 a month can save you $600 a year. That might not sound huge, but I actually took that $600 and funneled it straight into my down payment fund. When you’re saving for a major purchase, it’s all about finding ways to shift small amounts of money without sacrificing quality of life.

Barbara RobinsonBarbara Robinson
Marketing Manager, Weather Solve


Use Cash-Back Rewards for Savings

A close friend of mine used a really smart approach to save for their first home. They took advantage of cash-back rewards from everyday purchases and applied them directly to their down payment fund.

They made sure to use a credit card that offered strong rewards on things like groceries, gas, and monthly utilities. But instead of spending those cash-back rewards on something fun right away, they transferred every penny into a separate savings account dedicated to their future home. Over the course of about a year, they had saved an extra $600 just by being consistent and intentional.

This strategy didn’t feel like a sacrifice. They didn’t have to cut back on their regular expenses or pick up a side job. Instead, it was all about making the most of the money they were already spending. When it came time to buy their first home, that extra $600 made a real difference. It helped them hit their down payment goal sooner and reduced the amount they had to borrow.

Reilly James RenwickReilly James Renwick
Chief Marketing Officer, Pragmatic Mortgage Lending


Start a Savings Challenge

Buying their first home is one big dream a lot of people have in common. The big challenge, however, is coming up with a down payment. You see, in my personal and professional experience, I have found that having a down payment, and the amount you can come up with for your down payment, could just be the difference between merely securing your dream home and the factor that determines the affordability of your mortgage payments, which honestly is something every intending home buyer should be concerned with, especially if ensuring financial sustainability is their priority.

That said, one financial tip I would give to first-time home buyers to help them save for a down payment is that they consider a savings challenge. What I love most about the savings challenge is that it helps you stay disciplined and consistent in your savings goal. Plus, it helps you stay committed to the goal of saving a specified amount weekly or monthly, and this could propel your progress.

As someone who is easily motivated by success, having a savings challenge helped me build the momentum I needed to stay focused and determined throughout my down payment saving journey. And though my progress was slow (but only due to my income size at the time), I was encouraged to remain on track because I could see how my “little cents” were gradually but steadily adding up to a great pile, and this helped put things into clearer perspective for me, showing me how small but consistent effort can amount to significant results over time.

Another reason I believe this tip would be of immense benefit to intending home buyers saving for their down payment is that in addition to tightly sealing the holes in their budget, it also helps them celebrate small wins along the way because, in my experience, I have found that acknowledging these little victories is a great way to build savings momentum and stay motivated until the end.

Rinal PatelRinal Patel
Founder, Business Owner and Leader, Webuyphillyhomes


Live Rent-Free with Family

The major tip I would give to anyone trying to save for their first home is to swallow their pride, and if possible, live rent-free (or at least at a reduced rent) with family members. The largest cost people have in their lives is rent. If you cannot pay rent, you will reach your house deposit goal a lot sooner.

Ben GrimwadeBen Grimwade
Software Engineering Manager, Just Another Tech Lead


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