Alternative Down Payment Sources

Down-PaymentThis week’s Globe column looks at ways people scrape together down payments when they don’t have enough non-registered savings of their own.

It’s still perplexing that regulators let homebuyers borrow their 5% down payment from high interest sources, yet the government bans lower-interest cash-back down payment mortgages and 100% financing.

That’s not to say that borrowing a down payment is advisable (it isn’t in most cases). It’s more a statement that there is regulatory inconsistency here, which is peculiar in a hyper risk-sensitive lending environment.

More via: Canadians can still buy a house without saving their pennies

  1. I think we need more straight foward advice like this…
    I ‘d much rather spend my hard earned cash on much funer things then saving up for a large chunk /small stake of equity
    All while living in my own place riding the real estate escalator– AS long as the monthly payment is met – why not ?

  2. “funer things” :) That amused me :)
    I have friends that now have a mortgage for the same house they bought 6 years ago, but with HIGHER balance :)
    They probably did many funer things too :)

  3. I’m surprised your surprised about the regulatory inconsistency. It abounds in the financial services industry and as a consequence lots of things slip through the cracks often to the detriment of the clients eventually.

  4. Allowing people to borrow a down payment off a high interest credit card isn’t suprising? Sorry but I can’t understand how OSFI allows this.

  5. I don’t get how they can have a higher balance-you can only skip one payment a year ? always have to pay the interst don’t you ?

  6. Perplexed? “High interest sources” implies this is a high risk activity, which it is, so why should the taxpayer subsidize that risk? The average house-buying couple should be able to save up the pitiful 5% downpayment no problem (and it really is a tiny number when you consider the price of a first-time buyer property) in a couple of years; if they can’t, maybe buying houses is not for them?

  7. If your property increases in value and you refinance in order to take some of that money out you would end up with a higher balance than you started with.
    Riding the real estate escalator only works if that escalator only goes in one direction: up. It’s becoming more clear that you can’t always count on that, which makes it dangerous for people who have little to no equity in their property. They may end up owing more than they could pay off by selling the place.

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