Ottawa did away with Canada Mortgage and Housing Corp .-insured 100 per cent financing back in 2008. Home buyers with few savings searching for an alternative were left with cash-back down payment mortgages. (That’s where a lender gives you your 5 per cent required down payment, in exchange for a higher rate.) But those didn’t last long because in 2012, regulators barred banks from offering cash back for down payments.
Purchasing a home without your own down payment is often risky. One exception is when a borrower is well-qualified (apart from the down payment), has enough potential resources to withstand a loss of income and falling home prices, and is better off owning than renting. But exceptions are just that, and not the rule.
Young people use alternative down payment sources more often than most. Why? The main reason is a lack of savings. At a time when the average national home price has jumped to $356,687, the Canadian Association of Accredited Mortgage Professionals finds that more than one in four renters have less than $5,000 saved for a down payment. Yet, many of these folks are dead set on owning a home, see the list below of the various down payment methods:
Borrowing from other credit sources – When buying a home, you generally need at least 5 per cent of the purchase price as a down payment. Read more . . .
Getting a cash-back down payment mortgage – In many provinces, lenders that aren’t federally regulated (like credit unions) can still offer cash-back down payment mortgages. Read more . . .
Using a gifted down payment – If you’re a young home buyer with a generous relative, you may be lucky enough to get your down payment as a gift. Read more . . .
RRSP Home Buyers Plan (HBP) - First-time buyers can borrow up to $25,000 from their RRSP as a down payment. But this is a very different kind of loan, for three reasons: Read more . . .
Special lender and government programs - Various provinces and municipalities provide down payment assistance grants. These programs are typically for people with low or moderate income. Read more . . .