Here are five financial options worth consideration:
RRSP Home Buyers Plan
You can use up to $20,000 of your RRSP's to buy a home. If you are purchasing a home as a couple, this can mean up to $40,000. The amount is paid back over a 15 year period, and your first repayment is due within 2 years of withdrawal of funds. The plan has been highly successful and has been used by many Canadians. The plan has been extended into the current year, however certain conditions apply. For instance, RRSPs locked into company pension plans may not be applicable. Call your RRSP Centre if you have any questions about your own particular situation.
0% or 5% Down Payment
Canada Mortgage and Housing Corporation (CMHC) may insure first mortgages with 0% down for buyers. This plan is intended for Canadians who wish to purchase a home, and have the financial ability to both manage and sustain a large mortgage debt. The mortgage amount would be greater than 100% of the property value up to the allowed limit (which varies by area). The borrower(s) must qualify by having a GDS (Gross Debt Servicing) of no more than 35% and a TDS (Total Debt Servicing) of no more than 42%. The CMHC insurance premium is 3.75% of the mortgage amount.
* In the case of those who have suffered financial hardships these ratios may be lower (GDS - 32% and TDS - 40%).
Get Someone to Help Pay Your Mortgage
Have you ever thought of buying a property with an in-law suite, and renting it out to help pay the mortgage? Now that basement apartments are legal, as long as they conform to the Building Code and Fire Code, why not consciously buy your home with a built-in possibility of income to help pay off the mortgage sooner? This way you will be able to move more rapidly into your second home with more equity in your pocket. An apartment might bring in anywhere from $500 to $800 or more a month. That's quite a help when you're first starting out. Imagine someone giving you an extra $8,400 a year towards your mortgage payments? That pays 50% of your monthly mortgage cost of $1,400. It's worth considering.
Vendor Take Back Mortgage (VTB)
Some vendor's may be prepared to take back a mortgage to assist the buyer. The interest rate is usually lower than current market rates. The vendor may either hold the mortgage or sell it at a discount to a mortgage lender.
Prepaying a Portion of Interest or Pay downs
Back when interest rates were quite high and buyers could not afford to qualify for the high interest rates on the mortgages, the sellers sometimes were prepared to pre-pay a portion of the interest rate on a mortgage arranged by the purchaser or blend and increase an existing mortgage that carried an unattractive rate. This brings about a lower effective rate of interest and lower monthly payments.
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