Not too long ago, buying a home with 0 down was a possibility. Now, there is no such a thing and there is a minimum that you would need to put down to buy your home.
Down payment and the conditions
Savings, Investments, RRSP
Currently the minimum down payment to buy a home is 5%. There is a misconception that only a first time homebuyer can put 5% as their down payment. It can be your 10th time purchasing a home and as long as it is your primary residence, you can put 5% down and get financing for 95% of the home. This amount can be higher for those who are self-employed or qualifying under a special program. It is also higher if you are looking at financing a rental property.
Maybe you have been good at putting some money aside each month and saving up for your down payment. Perhaps you have contributed to RRSP’s and are using the funds as your down payment. If you are a first time homebuyer, you can take out up to $25 000 out of your RRSP tax-free towards your down payment. If the down payment is coming from you own sources ie. Savings or RRSP. you would need to prove a 90 day transaction history for most lenders. Some lenders accept a 30-day history for your down payment.
Gifted Down Payment
You may be part of the lucky group that is getting help from family. If that is the case the requirements are simple. Usually lenders ask that the funds are in your account presented with a gift letter. The gift is simple and indicates the funds are gifted to you with no intention for you to pay the family member back. Some lenders also ask for the source of funds (where your family member is getting the gifts).
Of course you can use a combination of your own savings along with a gifted down payment
Maybe you have trouble saving up to get to that hefty down payment or maybe you are short a little. If you already have an existing Line of credit, you can potentially use a portion of that to cover your down payment. Keeping in mind that this would only work for those who have good income and little to no debt. You would also qualify for a smaller mortgage, as the repayment of your Line of credit would be considered in your mortgage approval.
Other NEW option – Down Payment Helper Mortgage
If none of the above can work, a new mortgage from Vancity may be what you need. Looking at recent data from Genworth, 9/10 Canadians said that owning their own gave them a greater sense of emotional well being, and although it is perceived as tougher and more work, 9/10 Canadians still prefer to own vs. rent.
Vancity ‘s new poll looks at the reason people are holding back on owning their home. 57% of homeowners to be claimed that having enough down payment is the major reason they are holding back.
They introduced a product that essentially tops of the borrowers down payment up to 50%. The maximum purchase price is $500,000, which would mean a maximum $475 000 mortgage (5% down). In this case the borrower has to have $12,500 saved up in order to get this mortgage.
The Fine Print?
Borrowers still get the best member rates, which is currently at 3.29%. Because Vancity is giving them half of their down payment, they have included a rate premium of 0.55% to offset their cost for the 2.5% cash down payment. Vancity will also help clients with up to $1500 to help with closing costs. This product is available through both Vancity and your Mortgage Broker and only offered in Greater Vancouver & Victoria.
In just 5 days, the minimum down payment will be increased for properties that are over $500, 000. Currently, if qualified, a purchaser can put 5% down on a purchase below the million dollar mark. As of February 15th, 2016 the minimum down payment will increase to 5% of the first $500,000, and 10% on the remaining balance. So if someone is purchasing a property for $700 000, the minimum down payment will increase from $35,000 (0.05 x 700,000) to $45,000 (0.05 x 500, 000 )+ (0.1 x (700,000 – 500,000)