You’ll see a lot of financial experts advising young folks to save for a bigger down payment. That’s often solid advice but it’s also far easier said than done.
This week’s Globe column examines just how long it takes to scrimp for a down payment, the pros and cons of waiting and saving, and some ideas for speeding up the process.
More at: Saving up for a down payment…
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Last modified: April 28, 2014
Enjoyed the article Rob. Further to your point about emergency funds, I think a lot of young people would be better off keeping some of their savings in reserve. Some people use all their money for the down payment and closing costs and then have no contingency funds if times get tight. Just thinking of worst case scenarios here.
One thing I’d add is that the right down payment size depends a lot on where you live. It’s easier to put down 10% in Sudbury or Kingston for example than it is in Toronto!
Does CMHC still let people borrow their down payment, like off a credit card for example?
Yes.
People took houses 5 years ago with no down (when was legal) and 40 years amortization.
The ones with good finance management skills have now more than 50% equity.
No more comments.
Only a couple of lenders actually offer this type of plan. By adding debt this way you still have to have the debt ratios (TDS and GDS) within the limits. With one lender you can do a 5% cashback but at a much higher interest rate.
Right because the future always follows the past and prices always double every decade.
>> The ones with good finance management skills have now more than 50% equity.
The vast majority do not. Most of them will have paid their mortgages normally and now have 5% equity (modulo the house price appreciation/depreciation).
@John
Apple stock is up 300% in 3 years so by your logic we should run right out and buy Apple?
I hope you’re not an investment adviser.
That’s the issue, the vast majority’s priority isn’t to pay off their debts and then they start group crying process when the prices of the houses fall or the interest rates rise.
“Luckily” for them, our economy (banks) can’t exist without huge levels of personal debt.
For all first-time buyers in B.C., here is another grant that can help:
BC First-time Home Buyers…
Separately, please ignore the Surrey, BC grant link that appears in the story. It was unintentionally added and does not apply as down payment assistance.
Chicken, egg, etc.
Of course a down payment is almost always necessary but depleting your entire savings account can bring upon an unstable financial foundation.