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Saving For Your Downpayment

Whether you are a first time home buyer or have bought multiple properties, saving for the downpayment can seem like an impossible task. It can be difficult saving $10,000 or more but not impossible. Here are a few solutions to help you save for that downpayment:

1) For first time homebuyers a great way to come up with the downpayment is taking advantage of the RRSP homebuyers plan. Even if you have owned a home in the past you may still be eligible if you have not owned a property for at least 5 years. This option allows you to withdraw up to $25,000 from your RRSP tax free and pay it back over the next 15 years. If you do not have adequate RRSP’s saved up, take advantage of an RRSP loan. This will help you with the savings you need while also providing you with the opportunity to improve your credit rating. To find out more about how to use your RRSP for a downpayment please click here or contact us today with your questions and/or your application.

2) This year the Canadian government introduced the Tax Free Savings Account (TFSA). The TFSA allows you to contribute up to $5,000 per year where any income or growth and principle can be withdrawn tax free. With time you can save for that downpayment quicker than you think while avoiding paying government taxes. Contact us today if you would like to know more about this option.

3) Downpayment funds provided by your immediate family members, meaning parents, grandparents or siblings. This downpayment can be in the form of a gift provided it is non-repayable. The person(s) gifting the funds would not have to be a co-borrower, co-signer or obligated any further with the mortgage in any way if you qualify on your own. They are just helping you out and providing you with a gift allowing you to purchase a home. If you are lucky enough to have this help from your family contact us today if you have any questions and to start your application today.

If the above means for saving for a downpayment are not suitable options for you, here are a couple of more solutions:

4) Providing you have an excellent credit score, borrowing the downpayment may be an option for you. If you already own a property, you can use any equity in that property up to 95% of the value towards the downpayment. If you do not have a property or adequate equity in the property, the downpayment can be borrowed by other means. For example using credit cards, line of credit or even a friend or family member loan that is set up as a real loan. A couple of factors to consider in regards to borrowed downpayment are: 1) Approval for a large unsecured loan may be quite difficult. 2) The loan payments must be considered when qualifying for the mortgage and thus can really impact the amount of the mortgage you can be approved for. 3) You will now be dealing with at least two payments, one payment for the downpayment loan and another for the mortgage. If borrowing the downpayment is an option for you then please contact us today to discuss.

5) A cash back mortgage solution is where the lender gives you the minimum 5% downpayment. This is a great option if you are motivated to buy immediately and have an excellent credit score but have been unable to save for the downpayment. Currently the best 5 year rate for this product is 5.84%. This rate may seem high at first however, you must remember that interest rates are at all time lows and if it takes you a year or two to save for the downpayment, the best interest rates at that time could be around this percentage level anyways. In addition the housing market has been strengthening lately where in most areas prices are starting to rise meaning you will have to save more downpayment for your future purchase. Looking at these two points makes the interest rate look very attractive and allows you to purchase immediately. Keep in mind that if you break out of the mortgage term early for any reason the lender will take back the money given to you on a pro rated basis. If you feel this solution is the answer for you please contact us today to start your application and your homeownership dreams.

We hope this helps you with any downpayment questions. If you feel that the above options do not solve your downpayment problems please contact us. We can look at your individual situation and work with you to help with homeownership no longer being just a dream but real.

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