Is it ever okay NOT to have your own down payment when buying a home? Yes, but only if you, the borrower is well-qualified, can prove you are better off owning than renting, and have sufficient potential resources to cope with a loss of income and a drop in home prices. Easier said than done.
When buying a home you typically need at least 5% of the purchase price as a down payment. Government legislation prevents purchasers from borrowing that 5% from a lender if that lender is a bank or federal trust company.
If one in four renters has less than $5,000 saved for a down payment (according to the Canadian Association of Accredited Mortgage Professionals), but is determined to buy a home, where can potential purchasers find the funds? Here are 5 options:
- Line of credit, personal loan, or credit card
- Cash-back down payment mortgage from lenders that aren’t federally regulated
- Gifted down payment from a family member
- RRSP Home Buyers Plan (HBP)
- Special programs through lenders and government
No option is risk-free. You must consider the impact of high interest rates, a decline in real
estate prices, and repayment terms. At the end of the day, qualifying for a mortgage doesn’t guarantee your success in being able to carry it, along with other expenses, every month.
Know your options. Learn more mortgage strategies for first time home buyers. And let an unbiased Accredited Mortgage Professional help you today!
