If you are thinking about buying a home, here are some options that may be right for you.
Buying a home: The Importance of a Down Payment
One of the first steps to homeownership in Canada is understanding down payments.
Minimum Down Payment Requirements
The minimum down payment requirements for Canada vary based on the purchase price of the home. It is crucial to be aware of the following:
- For homes up to $500,000 the minimum down payment is 5%
- For homes between $500,000 and $999,999, it is 5% for the first $500,000 and 10% on the remaining portion
- Homes priced at $1 million or more are require a minimum down payment of 20%
Mortgage Loan Insurance
If you put less than 20% down on a property in Canada you are legally required to purchase mortgage loan insurance (or mortgage default insurance). The exception is for properties that cost $1 million or more – mortgage loan insurance is not available for homes in this price bracket.
Alternatives When You Can’t Reach 20%
If you don’t have a 20% down payment, here are some options:
- Save more or delay your purchase
- Adjust your budget or consider more affordable areas
- Seek financial assistance from family
- Utilize the Home Buyers’ Plan
- Explore the First Time Home Buyer Incentive and Home Buyers’ Tax Credit
- Consider the new First Home Savings Account
Co-Signing a Mortgage
Qualifying for a mortgage can be challenging. If you aren’t able to qualify for a mortgage, (or if you aren’t able to qualify for a mortgage large enough), you may be thinking about asking a parent or family member to become a co-signer. A co-signer does not co-own the house, however they are held responsible for mortgage loan payments if the owner ever defaults on them. A co-signer essentially lowers the risk to the lender by agreeing to cover your debt if you do not.
The Difference Between a Co-Signing and a Co-Borrower
The primary difference between a co-borrower and a co-signer is that a co-borrower is on the title and is also borrowing the money. Most commonly spouses are co-borrowers, but parents, for example could also be on title and on the mortgage as co-borrowers with their adult children.
Buying a home with Family or Friends
Buying a house with a family member or friend could be an option for some, as multiple incomes results in a larger mortgage amount. However, it’s not for everyone. It is important to consider pros and cons and potential challenges that may arise before moving forward.
Exploring Creative Financing Solutions
In today’s competitive housing market, flexibility is key. Explore various financial solutions, such as FHSAs and the FTHBI, to make your dream of homeownership a reality.
Contact Client First Mortgage Solutions
Before making any major decisions, consult with a Mortgage Advisor at Client First Mortgage Solutions. Remember, there is no one-size-fits-all approach to buying your first home in Canada. We will find a solution that best suits your needs. Contact us today!
Money Sense – Article Written by Erin Pepler – September 15, 2023
