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How My Wife and I Saved a 50% Down Payment

When I wrote the article about why my wife and I didn’t spend more than $450,000 on a home, I wasn’t sure what kind of reaction I’d get. I knew we did the right thing as far as our purchase price was concerned but it was difficult deciding how much about the financials I wanted to share in the initial post.

I wrote that we had more than 20% saved for our down payment but I didn’t get into the specifics. The purchase price of our condo was $432,000. The amount of the mortgage at closing was $206,000. If you don’t want to do the math, that means we had a down payment of $226,000 (52%). This amount doesn’t include the closing costs or the amount I put aside to furnish our new place.

Saving 50% for a down payment is a lot money, so how did we do it you ask?

Well, we saved of course. There’s really no secret, if you want to have a large down payment, you need to save money. Mind you, we’re in our mid-30s so we’ve had quite some time to establish our careers and save.

I’ve always been a big saver. As soon as I landed my first job I started saving. I wasn’t thinking about buying a home back then but I did put money into my RRSP. I also spend less than I make. Saving is pretty easy with that mentality.

Once my wife and I got married, saving became a huge priority. We knew we wanted to be homeowners eventually so we made sure our budget reflected our goals. After paying for fixed expenses, we set aside as much as we could towards savings. Basically, we believe in saving first followed by spending. Many people seem to do the opposite these days.

The extra savings also allowed us to fully max out our TFSAs. Despite the fact that this money technically was meant for the short term, I decided to invest some of it. Any extra savings sat in a high-interest savings account since we planned on using it to buy a home.

To be clear, we’re frugal, not cheap. My wife and I still eat out whenever we want and we take vacations every year. We’ve been to Japan, Brazil, Italy, Jordan, Istanbul, and many more places. We don’t mind spending on experiences and since we budget for them, we know it doesn’t affect us in the long term. We also have a car, healthy retirement savings, and a fully funded emergency fund.

I also took advantage of my company stock plan. As soon I was allowed to join the program, I maxed out. It’s a pretty generous plan so by the time we were ready to close on our home, I accumulated almost $30,000 in stock, which I sold.

Finally, our parents did gift us some cash. I’m not going to get into specific numbers but what they gave us didn’t change the overall amount of our down payment. It gave us options. Because of their generosity, we didn’t have to sell off our investments in our TFSA or RRSP (which had grown into the six digits). It allowed us to keep that money invested.

If we sold off all our investments in our TFSAs and trading accounts, and withdrew the maximum $50,000 ($25,000 x 2) from our RRSPs as part of the Home Buyers’ Plan, we would have come pretty close to not having a mortgage at all.

We chose not to do this because we wanted our investments diversified. The old saying about not putting all your eggs in one basket applies to all investments, including real estate.

Plus, with our current five-year fixed mortgage rate of 2.39%, we figured we could make more money investing. That being said, we don’t like debt, which is why we decided on having such a large down payment.

Some people say real estate will only go up and it would have been smarter for us to have cashed everything in and bought a house. Admittedly, had we bought earlier with a smaller down payment, maybe this would have been true. But buying a home is never that simple.

We have no idea where real estate prices are headed but saving allowed us to be in the position we’re in now. We’re happy and we don’t concern ourselves about what other people think of us.

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Flickr: Bruce Guenther