How Do I Get My Down Payment?
Hey everyone, Aleem here the Mortgage Specialist in Vancouver, Canada.
I'd like to discuss mortgage down payment today for those of you who are looking to purchase your next home but do not have a down payment.
Believe it or not, this is something that frequently comes up in my interactions with buyers.
Never fear, we're always here to help, and we'll work with you to show you exactly how you can get one.
Currently, the minimum mortgage down payment required in Canada is 5% of the purchase price, which can still be a substantial amount of money, especially for those people looking to purchase in the lower mainland.
For example, if you’re looking to buy a home valued at $300K, you will need a minimum of $15K for down payment not to mention the closing costs etc.
So, here are some creative ways to come up with that down payment:
- Savings – If you have savings, great! You’re all set.
- RRSP – As a First Time Buyer in Canada, you can withdraw up to $25K from your RRSP under the BC Home Buyer Plan. You must be purchasing the home as a primary residence, and you must repay this “interest free loan” back into your RRSP plan over the next 15 years. Now don't freak out, if you borrow the maximum $25,000, then each year until the loan has been repaid, the first $1,667 of your contribution goes towards paying back into your plan. For more information, give us a call.
- Cash Back – We have a couple of lenders that do offer “cashback” mortgages up to 5% of the purchase price. The cashback can be used towards your down payment, closing costs or any other purpose. Although the interest rate is higher on the cashback mortgage, this option is sometimes preferred when buyers want to take advantage of a property for sale when they don’t have cash on hand. Given where interest rates are sitting historically, it's still not a bad option.
- Gift – You never know until you ask! Ask a family member if they will help gift a down payment towards the purchase of your next home and you may get a generous family member who is willing to help, all you have to do is ask.
- Borrowed Down Payment – If you have a Line of Credit with an attractive interest rate, you can also advance the funds from your line of credit and use it towards a down payment to purchase your first home.
- Equity- If you have another property with some equity in it, you could borrow against this equity – again with interest rates where they are right now compared to historical levels this is not a bad idea-and provided that you can service the debt, you would be able to use this money towards the down payment and closing costs on your next purchase. Many people set up HELOCS on their homes, with interest only repayment. For more information on this, or any other questions you may have with regards to down payment, give us a call.
From Aleem Peermohamed – the Mortgage Specialist about Mortgage Down Payment!