How to Save for a Down Payment While Renting

Renters across Canada have been struggling with rising rent costs and wondering how they will be able to save for a down payment while renting. However, with some money management tricks and adjustments to your daily living, you can save for a down payment. Many successful homeowners started exactly where you are now, saving small amounts consistently until they reached their goal. It might go slowly, but every little bit helps. Here are some tips to save for a down payment while renting.

1. Make a Budget and Stick to It

Making a budget is the easiest way to make your financial goals happen. When you have a plan for where your money is going, it puts the power back in your hands and gives you an idea of how long it will take to save for a down payment.

To make a budget, write down your monthly income. Then, list your monthly expenses, including your savings goal. Your expenses should always be less than your income; otherwise, you are going into debt. Track your spending to ensure your budget is accurate. But the trick is that if you want to save enough for your down payment, you must ensure you stay within budget as much as possible.

2. Get Rid of Your Existing Debt

Qualifying for a mortgage does not end with saving enough for a down payment. Mortgage lenders will also look at your debt-to-income ratio (DTI), which is the percentage of gross income used to pay minimum monthly debt payments. If you have a high DTI, you are a risk to the lender, who will be less likely to approve you for a mortgage. However, if you work to cut down your existing debt while saving for your down payment, you can get approved for the house you want.

3. Cut Unnecessary Spending

Another way to boost your down payment savings is to cut back on a few luxuries. For example, consider buying groceries and making meals instead of ordering in, working out at home for free instead of paying for a gym membership, or taking public transit. Then, take the money you would have used on those splurges and put it into your savings account for the down payment.

Some people might be willing to sacrifice just about everything to have their house sooner, but most of us would rather not sacrifice our quality of life. Make a line in your budget for fun things like a night out with friends, and ensure you don’t go over budget. Saving for a down payment is not worth sacrificing your mental health.

4. Lower or Eliminate Rent Costs

Your most considerable monthly expense is likely your rent, so an effective way to save for a down payment is to cut your rent costs. Although moving is not fun, it can save you thousands of dollars annually. Renters who work from home can choose a location with a lower cost of living, while those who work in an office can find a cheaper apartment closer to their work, saving them expenses for both housing and transportation. Then, take the difference in your expenses and put it in your savings account for your down payment.

5. Add Extra Income

While cutting expenses is an effective way to create room in your budget to save for a down payment, another way to save is to take on a side hustle. There are many opportunities for part-time work, such as driving for Uber or Skip the Dishes or becoming a tutor. You could also start your own home business cleaning houses, pet sitting and dog walking, or doing yard work. It doesn’t have to be fancy if it earns you extra money for your down payment.

6. Immediately Save Any Bonuses or Gifts

If you receive regular bonuses at work or a tax return each year, these can easily be contributed toward your down payment savings without sacrificing your quality of life. To take it up another notch, ask for down payment contributions in place of gifts for your birthday or Christmas. If you feel you are missing out on fun for yourself, set aside a predetermined percentage or amount to use as you want and put the rest in savings.

7. Save Money in an FHSA

If you’re a first-time homebuyer in Canada, the First Home Savings Account (FHSA) is arguably the best way to save for down payment funds. With an FHSA, you can save up to $8,000 annually toward your first home, building a maximum lifetime contribution of $40,000. The real advantage is how these funds are taxed—you can claim tax deductions on your contributions (similar to an RRSP) while growing your investment tax-free inside the account. When it’s time to purchase your qualifying first home, you can withdraw the funds completely tax-free.

8. Tap Into Your RRSP

Your Registered Retirement Savings Plan (RRSP) can be a powerful resource when saving for a down payment through the Home Buyers’ Plan (HBP). This program allows first-time homebuyers to withdraw up to $60,000 from their RRSP to put toward a home purchase without the usual tax penalty on early withdrawals. For couples, this means potentially accessing up to $120,000 combined.

For the best way to save for down payment funds, consider combining the HBP with other government programs like the First Home Savings Account (FHSA). While the FHSA offers tax-free withdrawals without repayment requirements, the HBP allows you to access potentially larger amounts if you’ve been contributing to your RRSP for several years.

Remember that saving for a home is a marathon, not a sprint. By implementing multiple strategies simultaneously, you’ll make steady progress toward your homeownership goals. The combination of government programs, smart budgeting, and consistent saving habits creates the most effective path to having enough for your down payment. Set up a First Home Savings Account for your down payment and watch as your efforts pay off – literally!

And when you’re ready to take that next step, you’re not alone.

Saving for a down payment while renting can feel overwhelming, but a ELITE agent can help you understand what’s possible based on your goals and timeline. Whether you’re just starting to save or getting close to being ready, reach out today to get expert advice and move confidently toward homeownership.