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With house prices continuing to skyrocket in Toronto and across the GTA, we’ve had a steadily increasing amount of people looking to purchase homes here in Collingwood, Wasaga Beach, The Blue Mountains, Grey County and Meaford…and who can blame them?! Not only are home prices more affordable, but this region also boasts the most wonderful landscapes, year-round activities, and cozy communities that are the envy of many!

If you are interested in saving up for that down payment, or you’ve already started and want to know the next steps, we’ve outlined the top considerations to get you going and to answer some concerns you may have.

How does it work?

In Canada, you must pay a portion of the purchase price upfront when buying a home, cottage, condominium or even a vacant lot – specifically, if you are getting a mortgage for that property. The minimum down payment is 5% of the purchase price for a home valued at $500,000 or less, then it’s 10% for any amount between $500,000 and $999,999. If the home is valued at $1 million or more, then the down payment will be 20%.

The more money you have towards your down payment, the less of a mortgage you will need, thus saving you significant money in interest payments.

What is a conventional mortgage?

The most popular type of mortgage is called a conventional mortgage, where a bank or mortgage broker can provide you with a loan of up to 80% of the purchase price of the home. So, if you only have 5, 10 or even 15% of your down payment saved up, you’ll need to come up with the remainder to get you to 20%. Luckily in Canada, you can get mortgage loan insurance if your down payment is less than 20% of the purchase price. Most home-buyers in this situation work with the Canada Mortgage and Housing Corporation (CMHC) and your lender can help you set this up and explain how the process and payments work.

Using your RRSPs

If you are a qualifying first-time home buyer, you might want to look into the Canada Home Buyer’s Plan. Through this plan, you could ‘borrow’ against your existing RRSPs to use for your down payment. The maximum you can take out is $35,000 per person (up to $70,000 per couple) and you have 15 years to pay what you borrowed back into the RRSPs you withdrew from. While there is no penalty or fee for accessing your RRSPs for your down payment, you won’t be earning any interest until they start to get paid back into your RRSP plan.

The First-Time Home Buyer Incentive

If you are a first-time home buyer, there is a brand-new federal government incentive program that may be of interest to you. While it doesn’t help with down payments per se, its goal is to help people access affordable homes while reducing monthly mortgage costs. To find out more about this unique lending program and to see if you’re eligible, click here. Further, be sure to talk to your lender, Realtor® and/or real estate lawyer about other government incentives such as the First Time Home Buyer’s Tax Credit and the GST/HST New Housing Rebate. With these incentives in place, you may be closer to your down payment than you had originally thought!

Many people are choosing creative ways to save for their down payment, such as co-renting with others, living with parents while saving, or taking on a second job. If homeownership is a dream of yours, be sure to talk to the professionals about your down payment options. You’ll need to know that you’re really ready and able to manage in terms of other costs and concerns such as property taxes, closing costs, utilities, repairs, condo fees, and so on.

At Clairwood Real Estate, we’re here to help you break into the real estate market and get started on your new adventure as a homeowner. Connect with our trusted team today; we’re here to walk you through every step of the process whether it be your first home or your fifth investment property. Call us today at 705-445-7085 and let’s get started.