I see so many who want to own a home who earn enough household income to carry a home, yet that down payment requirement keeps them renting, often for years and years. If you are renting a home you are already in effect paying a mortgage, just not your own. You are also putting some extra cash each month into someone else's pocket while their property increases in value each year on your investment.
Without taking some active steps to change from home renter to home owner, one year leads into the next and the opportunity in many cases moves further away rather than closer over time. What can you do differently and additionally that will allow you to mark on a calender with confidence when you will buy a home? Here are some strategies that many have taken advantage of.
You can borrow up to $25,000 in Ontario to put towards a qualified home purchase with as much as 15 years time to put that money back into your RRSP fund. Chances are a home purchased today will appreciate by more than $25,000 within the repayment period and borrowing from that accrued equity and shifting it back over to your RRSP down the road is one method of repaying your RRSP loan. You may choose to make regular payments over time or a combination of both.
Lenders will allow the down payment to come from immediate family members (parents, grandparents or siblings) in the form of a gift. Parents or grandparents will often help a child or grandchild with their first home purchase without any expectation of repayment. The family member must fill out and sign a gift letter confirming that the funds are indeed gifted. If the money came from anyone else (ie: friend or co-worker), it would be treated as a loan since non-family members, and even sometimes, family members expect to be repaid at some point in the future. If your parents home has little or nothing owing and you are within your comfort zone asking, then plan a trip to a financial adviser to learn the best routes to take to put some of their home equity to practical use. Again you are acquiring an asset that will appreciate by more than the amount you borrow for a down payment within a few years and "gifts" can go both ways.
Various levels of government offer programs to incentivize home ownership which can complement your own savings efforts or provide additional funds to put towards a down payment. Do a little research of your municipal, county, provincial and federal governments to see what is being offered and whether you qualify. These programs change from time to time and many are offered for limited times and or with limited amounts available on a first come first served basis.
First things first
Book an appointment with your bank, a mortgage broker or financial adviser. Learn precisely where you stand in terms of how much home you qualify for and can comfortably carry. You will learn where you can improve your borrowing strength and what you need to do to get there and most importantly you will take home ownership from being just a dream to being an actual goal with a step by step plan and time-line for achieving it.
Don't confuse dream home with first home. Stepping into a less than ideal home will put you closer to owning the dream home you really want than just waiting and hoping while you continue to contribute to your landlord realizing his or her dreams.
Click here to read up on 4 tips that will help you to save towards your down-payment.
Call me anytime to set up a free consultation and let's get your home buying plans underway.