top 5 down payment options
Lets get a plan in order
Down payment and home ownership go hand in hand, and today the minimum down payment required is 5%. This can be a stumbling block leading people to think they never will be home owners. Not true! Once you make the decision that home ownership is the route you want to take, it is attainable! We have some down payment options to help you get there.
A great starting point is to have an honest look at your current financial situation. It is amazing how clear a picture becomes when you write down your expenses versus your income. There are many apps out there that help track your spending on a transaction basis which may help you prioritize your goal.
Once you have an idea of your financial picture, next is figuring the best down payment option or combination of options that will work for you. Here are some ideas to consider.
5 Options to pull your down payment together
- Save, save, save. Find a savings plan that works for you. A lot of employers will deposit your pay to more than one bank account. Saving $200 biweekly, in just over 3 years you would accumulate approximately $17,500. This number equates to 5% of a $350,000 purchase price, which could be a perfect starter home.
- Put your RRSPs to work by taking advantage of the Home Buyers’ Plan. You can withdraw up to $25,000 (up to $50,000 for a couple) subject to certain conditions. The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment.
- Do you have a family member willing to help? A gifted down payment, from immediate family, is a great option. Those gifting will need to sign a gift letter, stating the exact amount of the gift, and that the gift does not have to be repaid. The letter will also include an address and phone number for the lenders to call and verbally verify the information.
- Investments or mutual funds can be cashed and put towards your down payment. Be aware of any penalties or tax implications.
- Borrowed down payment such as personal loans, lines of credit, credit cards, and equity may be accepted by some lenders. If you have excellent credit, employment history, and meet lender qualifications this may be an option for you. The TDS calculation will include the repayment of borrowed funds. Lenders will likely charge a premium making interest rates higher than the posted fixed rate or increase the mortgage insurance premium.
Ready for the next step
Once you have an idea of your financial picture and down payment option(s), next, it’s time to consider a mortgage pre-approval. This process gives you an idea of what you are qualified for. No sense shopping out of your comfort zone!
Down payment may seem like a huge hurdle but once you make the decision to start the race, there are always ways to get over the humps and cross the finish line.
If you have an idea or plan for your down payment, we’d be happy to discuss it with you. We’re here to help!