If you’re tired of renting or want to move into your own space, it’s a great time to think about buying a home. Not only are there a lot of affordable options to choose from in the Edmonton area to meet your specific needs, but there are great rates to take advantage of.
Before you apply for a mortgage, you need to think about your down payment options.
What you need
The minimum down payment required in Canada is 5% of the purchase price (subject to price restrictions), however, there is talk about increasing this to 10%. Mortgages with less than 20% down are high-ratio mortgages and involve you paying mortgage default insurance from one of the three insurers (CMHC, Genworth and Canada Guaranty). If you can save 20% down payment, mortgage insurance is not required.
Whatever your estimated down payment amount may be, here’s some options to get you closer to becoming a homeowner.
Save like crazy
Committing to saving tactics is one way to reach your down payment goal. It also shows lenders how committed you are to home ownership, and that you can look after finances and follow a budget.
If you have family members who want to help you put a down payment on a new home, gifted money can be used. However, everything must be carefully documented with bank statements, letters from the ‘donor’, dates and so on. There must be a clear paper trail that shows this gift is intended for you and your home purchase.
Home Buyers Plan
The federal government offers a Home Buyer’s Plan, which allows first time home buyers to withdraw up to $35,000 of their RRSP savings ($70,000 for a couple) to help with your home purchase. You then have 15 years to pay the money back into your RRSPs.
On a final note, it’s important to mention some additional costs you’ll need to save for that many first time home buyers don’t know about or plan for in advance: closing costs. You’ll need to plan for additional expenses such as paying for inspection fees, legal costs, etc…so be sure to add a little more to your down payment budget.
If buying a home is a goal of yours, I’d be happy to help find a solution that’s best for you!
Tatum Neufeld, BComm
Mortgage Broker • Mortgage Tailors