Do you feel stuck in that rented dwelling and left out of the dream of home ownership? Tight budgets, life emergencies, unforeseeable events can make saving that 5% downpayment seem especially daunting and with home prices moving up that downpayment amount just seems to get bigger and bigger.
All major banks require 5% down on mortgages that cannot be borrowed; however, there are loop holes that anyone including yourself can take advantage of to work around this requirement.
1) The 1st Time buyers RRSP loan 0% Down Loophole
Almost all major banks will lend anyone even with poor credit, money to contribute to thier RRSP plan. Banks do this because they know they hold that RRSP money in a locked in account that they can take in the event that you default. But heres the loophole: Revenue Canada will allow anyone who has not owned a home during the last 5 years to withdraw thier RRSPs to use as the downpayment on a house (this is called the 1st time buyers RRSP plan. In effect, you can get an RRSP loan for the 5% downpayment amount and withdraw it and use it as your downpayment! There are some restrictions: you must hold the RRSP in your account for 89 days before withdrawing so you must negotiate closing dates accordingly AND the bank will work the RRSP loan payment in to your debt servicing calculation so the amount of the mortgage they are willing to give you will be smaller.
Want to disscuss further? Call me at 250-981-3100 today or make an appointment with your finacial advisor at your bank and see if this is an option for you!
2) Invented Savings - The 90 day Line of Credit Loophole
If you have a good credit score most banks with give you an unsecured line of credit, witch is kind of like a credit card but usually at a much lower rate. Make an appointment with your banker and see if they will give you one. The key here is that once you have a line of credit set up, you must move the balance (or amount needed for 5% down) in to your chequeing account and let it sit for 90 days. After which, your bank will consider it savings and BOOM you have a downpayment. The disadvantage here, is that you will not get approve for financing until after the 90 days so you cannot even write an offer with your realtor until after then so there is a degree of planning ahead needed.
3) The Cashback Mortgage
If you have an excellent credit score, most banks will actually lend you the 5% downpayment but will only give it to you after your deal closes in order that they meet the federal gouvernments requirement that buyers have a non-borrowed 5% downpayment. This means that you have to come up with the 5% but then the bank will give it back to you after closing. If you have parents or a close family member that can "gift" you the downpayment on a temparay basis this can be an option. But remember this "gift" should be an actual gift and not a loan or technically you are breaking the mortgage rules established by the Federal Gouvernment.
4) Other Strategies
There are several other methods for borrowing a downpayment but they are complex and beyond the scope of this blog entry. My point is to never give up hope! That dream of home ownership is always within your reach even if you do not have a downpayment. being a Realtor isn't just about showing houses. Any average realtor can show you houses. An excellent realtor solves problems, and not having a downpayment is just a simple problem that can be resolved.
Do you have questions about the real estate market, real estate investment questions, or even finance questions. click here to email Mike Hurrell.
