Wouldn’t it be nice if buying houses for sale was like the latest new car promotion? “No down payment, no interest for 12 months!” Sure, and we’d love it if Revenue Canada just “took our word for it” on what we owe this year. Where has the trust gone?
But until things change, you’ll have to deal with the reality of down payment requirements when planning your next home purchase. In an ideal world, that means putting up 20 per cent of the purchase price and avoiding that nasty high-ratio mortgage insurance. If you’re like most buyers though, the 5 per cent minimum is more realistic.
The challenge is that with many homes selling for $300,000 and up these days, even 5 per cent, or $15,000, can be daunting for the first time homebuyer. However, with a little resourcefulness and knowledge of the options, your prospects for managing that critical down payment will be looking up in no time.
Save it Up
Maybe because they didn’t accept VISA on the Mayflower, our ancestors learned to buy things the hard way: By saving for them. It’s a strategy we’d do well to emulate, especially when looking at houses for sale.
Once you figure out the price range you’ll be shopping in and what that translates to for a down payment, decide on your time frame and make a plan. How much do you need to save each month to reach your goal? It might seem overwhelming at first, but it’s amazing how small changes can pay off big time in the end.
Drink the free coffee at work for a while instead of buying the five-dollar latte. Eat in more and dine out less. Before you know it, you’re ready to make an offer, and the satisfaction you feel when the deal closes will top the greatest caffeine buzz you’ve ever had.
Pass it Down
One potential source of a down payment that sometimes gets overlooked is an impending inheritance. It’s something we often don’t talk about for fear of seeming insensitive or opportunistic.
But when “the writing is on the wall”, there’s nothing wrong with penning that into your savings plan towards houses for sale. After all, it’s why a grandparent or uncle puts you in their will in the first place, so they can enhance your life when they’re gone. Besides, if they’re moving on to a “better place”, why can’t you?
Take it Out
Have you ever turned the house upside down trying to find your glasses, only to realize they were on your head the whole time? Sometimes we have what we need and don’t even realize it.
Perhaps you’ve been putting away thousands into a tax-free savings account and thinking it had to stay there. As it turns out, you can withdraw any amount at any time with no penalty or taxes to pay.
Your Registered Retirement Savings Plan (RRSP) is another option in funding houses for sale. Provided that you pay it back within 15 years, withdrawals are allowed without penalty through the Canada Revenue Agency’s Home Buyers’ Plan. It’s one agency that’s rarely on your side, so take advantage while you can.
Save it up, pass it down or take it out. These are just three of the many options for securing a down payment on your new home with minimal stress or hardship. Just don’t try the IOU approach, especially with the taxman. He may lock you up and throw away the key. And while you’d finally be getting into some prime “real estate” with no down payment, the trade off will come when you meet your new neighbors.