Mortgages-Maria-T-Post

7 Ideas to Help You Achieve Homeownership Sooner

Many people put off buying a home because their down payment is either not sufficient or non-existent.  As I truly believe that owning real estate is a great investment, below are ideas to help you with the saving of the necessary funds.  Keep in mind I’m assuming you have all other criteria in place, such as a stable income and excellent credit worthiness.  Lastly, if you have unsecured debt, pay it down to a minimum or completely pay it off, as this will only work to your advantage.

In regards to credit worthiness, ensure it’s solid by making credit card payments on time and not allowing accounts to go to collections.  In addition, ensure you have a minimum of two credit cards reporting to your credit report and that you maintain a score of a minimum of 680.  This will ensure you are provided the privilege of borrowing the maximum allowable by the mortgage default insurance providers such as CMHC and Genworth.

Prepare a budget to determine what you are comfortable with.  Use this calculator to determine monthly mortgage payments. You can use  our current 5 year fixed rate of 2.69% as a guide.

The minimum required for a down payment is 5% of the purchase price if you are purchasing a home to live in – even if it has a rental component.  By saving 20%, you are saving on mortgage default insurance premiums.  You will also need to save 1 ½% of the purchase price for closing costs.

Here are my suggestions:

  1. If you are a first time home buyer and you have RRSP savings, you are eligible to borrow up to $25,000 interest free.  If you are purchasing it with a partner, you can potentially borrow $50,000 together towards the purchase of your home.  You can pay it back in installments every year and return the monies back to your RRSP account.  For full details, visit the Canada Revenue Agency – Home Buyers Plan.
  2. If you have family that will let you live with them for free or for a small fee, take advantage of it.  This will allow you a great opportunity to build up your down payment a lot quicker than if you are renting and trying to save at the same time.  Remember, this is not a free ride. Repay them by picking up chores around the house such as cutting the grass, shoveling snow or preparing meals.
  3. As this is the time when many people will be receiving tax refunds, this is a timely idea:  Put your tax refunds towards your down payment savings.
  4. Sell items you are no longer using by having a garage sale or by auctioning them online.  Both options are free (for the most part) and will allow you to declutter your space as well make some easy money.
  5. Pick up a part time job or extra hours at work and put the additional earnings straight into your down payment fund.
  6. Contact your local service providers (e.g. internet, television and home and car insurance companies) to see if you can negotiate a better rate.  All savings should go directly into your down payment fund.
  7. Certain cities offer the Affordable Homeownership program.  To see if your city offers such a program, contact your local councilor. As an example, Mississauga, London and Waterloo are currently offering the program.  The city provides you with the 5% needed for your down payment.  For full qualification rules, please contact the city directly.

Bonus:

As a parent, I often worry about how my own children will be able to afford a home.  I know I’m not the only parent who has these thoughts.  So here’s my idea around this problem: Charge your children room and board, but instead of keeping the money, invest it and give it to them when they are ready to buy their own home.  What do you think?  Is this a good way of helping your children achieve home ownership?

 

I’m always available to discuss your situation with you.  Please do not hesitate to contact me at maria@heritagelending.com, or get a FREE no obligation mortgage analysis today.