Looking to purchase a house right now? Here are some ways to quickly get a down payment for Calgary real estate.
Low Down Payment Mortgages
There are a few programs to help first time home buyers that require very little down payment in regards to the total purchase price. This option will get you to your down payment goal a lot faster than the traditional mortgages. CMHC loans, backed by the Canada Mortgage and Housing Corporation, only require at least 5% down. Conventional loans, backed by private lenders, may only require 0-3% down, but those loans usually rely on good credit and have a little higher rates than the big 5 banks. These low down payment options might be a great way to quickly get into a house and start building equity. A big drawback of this strategy is that the lower the down payment is, the more interest you are likely to pay over time which costs you more money in the long run. Additionally, some of these low down payment programs have extra fees associated with them such as large origination fees that are rolled into the payments or required mortgage insurance.
Down Payment Gifts or Loans From Family or Friends
One of the most accessible sources of down payments for real estate are gifts or loans from family members or friends. Make sure you have your payback agreement in writing if you agree to a loan, and pay it back! The last thing you want to do is ruin personal relationships over a house! One drawback to using a gift as a down payment for real estate is that it’s not quite as simple as it seems. The person who gave you the money must verify they gave the gift via a certified gift letter and possibly bank statements. If you do have to rely on gifts for the down payment of a house, you might not be prepared for the full cost of home ownership and are statistically likely to default on the loan. Another drawback is if your down payment for Calgary real estate is a personal loan, that loan must also be calculated into your income to debt ratio to make sure you can still qualify for the loan.
Crowdfunding your Down Payment
There are a few sites that enable you to crowdfund your down payment, although mostly in the US. There are some sites that work like a registry where contributions to your down payment are funneled into your bank account. This scenario works well for situations like engaged couples or newlyweds. Other sites require you to become pre-qualified for a loan before they will allow you to raise money for your down payment for Calgary real estate. Possible drawbacks to this strategy are credit card processing or other fees and the potential inability to shop around for lenders.
Retirement Account Withdrawals or Loans
Depending on your retirement plan, you may be able to withdraw funds or request a loan from your RRSP/RSP/RESP balance for your down payment for Calgary real estate, but this strategy should be used with discretion. There are a lot of taxes and fees surrounding early withdrawal from retirement accounts. Make sure you consult with your accountant before choosing this strategy.