Wouldn’t it be nice if buying homes for sale was like the latest new car sale? “No down payment, no interest for 12 months!” Sure, and we’d love Revenue Canada to just “take 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 percent of the purchase price and avoiding that nasty high-rate mortgage insurance. However, if you’re like most buyers, the 5 percent minimum is more realistic.
The challenge is that with many homes selling for $300,000 and up these days, even 5 percent, or $15,000, can be daunting for the first-time homebuyer. However, with a little ingenuity and knowledge of the options, your prospects for managing that critical down payment will improve in no time.
Save it
Perhaps because they didn’t accept VISA on the Mayflower, our ancestors learned to buy things the hard way: by saving up for themselves. It’s a strategy we’d do well to emulate, especially when looking at homes for sale.
Once you determine 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 may seem overwhelming at first, but it’s amazing how small changes can pay off in the end.
Drink the free coffee at work for a while instead of buying the five dollar latte. Eat more and go out to dinner less. Before you know it, you’re ready to make an offer, and the satisfaction you feel when the deal closes will outweigh the biggest caffeine rush you’ve ever had.
pass it on
One possible down payment source that is sometimes overlooked is an impending inheritance. It’s something we often don’t talk about for fear of appearing insensitive or opportunistic.
But when “the writing is on the wall,” there’s nothing wrong with writing that into your home-for-sale savings plan. After all, that’s why a grandparent or uncle put you in their will in the first place, so they can make your life better when they’re gone. Also, if they’re moving to a “better place,” why not you?
make it happen
Have you ever walked around the house trying to find your glasses, only to realize they were on your head the whole time? Sometimes we have what we need and we don’t even realize it.
Perhaps you’ve been saving thousands of dollars in a tax-free savings account and thinking you had to stay there. It turns out that she can withdraw any amount at any time without paying penalties or taxes.
Your Registered Retirement Savings Plan (RRSP) is another option for financing homes for sale. As long as you pay it back within 15 years, withdrawals are allowed without penalty through the Canada Revenue Agency’s Home Buyers Scheme. It’s an agency that is rarely on your side, so take advantage while you can.
Save it, pass it or take it out. These are just three of many options for securing a down payment on your new home with minimal stress or hassle. Just don’t try the promissory note approach, especially with the taxman. He can lock you up and throw away the key. And while you’ll finally be getting into some premier “real estate” with no money down, the payoff will come when you meet your new neighbors.
