Buying a House and Taking Part of 20% to move initial payment date forward
In the prior PMI discussions here, it's been stated that the bank is not obligated to remove PMI until the mortgage's natural amortization puts the debt at 78% LTV. So, paying in advance like this will not automatically remove the PMI.  Nor will a lump sum payment be certain to move the next payment ahead a year. If it's entered as a principal prepayment, the next month's payment is still due. In the world of coupon books, if you sent in a year's payments, you'd not benefit from the interest saved, in one year you'd owe what the amortization table tells you.  There's no free lunch when it comes to mortgages or finance in general. This is why we usually caution that one should not be cash poor the day after buying a house. Best to save 30%, put down 20%, and have a cushion after the closing.
Unless you're running a self-employed business with a significant turnover (more than £150k), you are entitled to use cash basis accounting for your tax return, which means you would put the date of transactions as the payment date rather than the billing date or the date a debt is incurred. For payments which have a lag, e.g. a cheque that needs to be paid in or a bank transfer that takes a few days, you might also need to choose between multiple payment dates, e.g. when you initiated the payment or when it took effect. You can pick one as long as you're consistent: You can choose how you record when money is received or    paid (eg the date the money enters your account or the date a cheque   is written) but you must use the same method each tax year. "I second DJClayworth's suggestion to wait and save a larger down-payment.  I'll also add: It looks like you neglected to consider CMHC insurance in your calculation.  When you buy your first home with less than 20% down, the bank will require you to insure the mortgage. CMHC insurance protects the bank if you default – it does not protect you.  But such insurance does make a bank feel better about lending money to people it otherwise wouldn't take a chance on. The kicker is you would be responsible for paying the CMHC insurance that's protecting the bank.  The premium is usually added on to the amount borrowed, since a buyer requiring CMHC insurance doesn't, by definition, have enough money up front.  The standard CMHC premium for a mortgage with 5% down, or as they would say a ""95% Loan-to-Value ratio"" is 2.75%.  Refer to CMHC's table of premiums here. So, if you had a down-payment of $17,000 to borrow a remaining $323,000 from the bank to buy a $340,000 property, the money you owe the bank would be $331,883 due to the added 2.75% CMHC insurance premium. This added $8883, plus interest, obviously makes the case for buying less compelling.  Then, are there other closing costs that haven't been fully considered? One more thing I ought to mention: Have you considered saving a larger down-payment by using an RRSP?  There's a significant advantage doing it that way: You can save pre-tax dollars for your down-payment. When it comes time to buy, you'd take advantage of the Home Buyer's Plan (HBP) and get a tax-free loan of your own money from your RRSP. You'd have 15 years to put the money back into your RRSP. Last, after saving a larger downpayment, if you're lucky you may find houses not as expensive when you're ready to buy.  I acknowledge this is a speculative statement, and there's a chance houses may actually be more expensive, but there is mounting evidence and opinion that real estate is currently over-valued in Canada.  Read here, here, and here." To add a little to mhoran_psprep's answer, the clause in question is not binding in perpetuity but only for the duration of the construction loan.  I assume that you are getting the loan from a bank rather than through  the builder.  The way a construction loan works is that the bank  agrees to loan you a certain amount of money for you to pay the builder but you don't get the money upfront to hold  till the construction is complete, or to pay to the builder each month. Each month, or whenever a major phase of the construction is completed, the builder submits a request for payment of (say) $X to you stating what part of the  whole work has been completed and attaching lien waivers from all the subcontractors that did any part of the work that they have been paid in full.  It is up to you to verify  (for your own protection) that the work has in fact been completed and that the work is satisfactory.  If everything looks OK, you send the  request (together with the lien waivers) to the bank which sends its own home inspector to verify that the work has in fact been completed. After the inspector's OK, the bank pays the builder $X  (more commonly $0.95X or $0.9X) and gets a lien waiver from the builder in the amount of the payment.  At this point, the amount that you  owe the bank increases by the amount paid. This goes on till the  house is completed, the municipality or county issues a Certificate  of Occupancy (meaning that that august body is satisfied that  there are no building code violations etc. and the place is  habitable) and the penultimate request for payment is made. Penultimate because a good construction contract withholds  some amount (5% or 10%) of the money owed to the builder  for anywhere from three  months to a year to ensure that the builder will come back  and fix things that were done incorrectly but not noticed  till the house was lived in. (For example, one drywall nail had penetrated an electrical wire creating leakage. This was not discovered during inspection - flip the switch; light turns on? yes, so flip the switch back and move on - but when the light was turned on for three hours after the house was occupied, an electrical fire began inside the wall!)  So, after this settle-down period is over, the builder submits the final payment request and gives a final lien waiver to the effect that everything owed to him has been paid. It is during this period of time that the bank wants to make sure that you don't take on additional loans or debts, or make any material changes to the facts that the bank used in assessing your credit-worthiness and making the decision to loan you the money. Hence the clause that is causing you to worry.  Construction loans usually are at higher interest rates than regular mortgages so that once construction is complete, it is in your best interest to replace the construction loan (paying off its mortgage) with a regular home-owner loan and mortgage.  If you get the regular mortgage from the same bank, you might be able to get some of the fees waived while going to another bank will mean that appraisal fee, termite inspection fee, etc will have to be paid. But in either case, the prohibition against buying that Beemer will disappear; just don't take out that auto loan between the mortgage application and the closing on the regular mortgage as mhoran_psprep's buyer did! "Fundamentals:  Then remember that you want to put 20% or more down in cash, to avoid PMI, and recalculate with thatmajor chunk taken out of your savings.  Many banks offer calculators on their websites that can help you run these numbers and figure out how much house a given mortgage can pay for. Remember that the old advice that you should buy the largest house you can afford, or the newer advice about ""starter homes"", are both questionable in the current market. =========================== Added:  If you're willing to settle for a rule-of-thumb first-approximation ballpark estimate: Maximum mortgage payment: Rule of 28. Your monthly mortgage payment should not exceed 28 percent of your gross monthly income (your income before taxes are taken out).  Maximum housing cost: Rule of 32. Your total housing payments (including the mortgage, homeowner’s insurance, and private mortgage insurance [PMI], association fees, and property taxes) should not exceed 32 percent of your gross monthly income. Maximum Total Debt Service: Rule of 40. Your total debt payments, including your housing payment, your auto loan or student loan payments, and minimum credit card payments should not exceed 40 percent of your gross monthly income. As I said, many banks offer web-based tools that will run these numbers for you. These are rules that the lending industy uses for a quick initial screen of an application. They do not guarantee that you in particular can afford that large a loan, just that it isn't so bad that they won't even look at it. Note that this is all in terms of mortgage paymennts, which means it's also affected by what interest rate you can get, how long a mortgage you're willing to take, and how much you can afford to pull out of your savings. Also, as noted, if you can't put 20% down from savings the bank will hit you for PMI. Standard reminder: Unless you explect to live in the same place for five years or more, buying a house is questionable financially. There is nothing wrong with renting; depending on local housing stock it may be cheaper. Houses come with ongoung costs and hassles rental -- even renting a house -- doesn't. Buy a house only when it makes sense both financially and in terms of what you actually need to make your life pleasant. Do not buy a house only because you think it's an investment; real estate can be a profitable business, but thinking of a house as simultaneously both your home and an investment is a good way to get yourself into trouble." "I think so.  I am doing this with our furniture.  It doesn't cost me any more money to pay right now than it will to pay over the course of 3 years, and I can earn interest on the money I didn't spend. But know this: they aren't offering 0%, they are deferring interest for 3 years.  If you pay it off before then great, if you don't you will owe all the accumulated interest. The key with these is that you always pay it, and on time.  Miss a payment and you get hosed.  If you don't pay on time you will owe the interest that is being deferred.  They will also be financing this through a third party (like a major bank) and that company is now ""doing business with you"" which means in the US they can call you and solicit new services.  I am willing to deal with those trade offs though, plus, as you say, you can always pay it off. WHY THEY DO IT (what is in it for them...) A friend of mine works for a major bank that often finances these deals here is how they work. Basically, banks do this to generate leads for their divisions that do cold calls.  If you are a high credit, high income customer you go to a classic bank and request cash, if you are building credit or have bad credit, you go to a ""financial services"" branch.  If you tend to finance things like cars and furniture, you get more cold calls." I Usually would not say this but if you can just put down 20% I would do that and get a 15 year mortgage.  The rates are so low on 15 year mortgage that you should be able to make more than the 3% in the market per year and make some money.  I wouldn't be surprised if for 1/2 of the term of your loan you will be able to make that just in interest.  Basically I have done this for my house and my rental properties.  So I have put my money where my mouth is on this.   I have made over 9% each of the last three years which has made me $12,000 dollars above and beyond over what I would have paid in interest per year.  So it a decision that net me $36,000 for doing nothing.  Now the market is going to be down some of those years so lets see how it works out but I have history on my side.  Its not about timing the market its about time in the market.  And 15 years in the market is a pretty safe bet albeit not as safe as just dumping you money in the mortgage. Your question has an interesting mix of issues. ASAP and 3-4 years doesn't feel like the same thing. ASAP results in bad decisions made in haste. Four years of living very frugally can create a nice down payment on a house.      A car is only an investment for Uber drivers and those who are directly financially benefitting from a car's use. For everyone else, it's a necessary expense.  What I'd focus on is the decision of buying a plot of land. Unless this is a very common way to do it in your country, I don't recommend that order. Having land and then trying to finance the building of a house has far more complexity than most people need in their lives. In my opinion, the better way is to save the 20% down, and buy a new or existing home you can afford.  In the end, spending is a matter of priority. If you truly want to get out in the least time, I'd save every dime I can and start looking for a house that your income can support. Read the terms and conditions very carefully. Many zero percent deals have a requirement that you pay back at a certain date, and if you don't, you'll have to pay some enormous percentage. Nobody will remind you of the date, because the lender has the secret hope that you will forget.