House down payment

[gladaki]

Calgary prices for repeat home sales hit a new high
10% hike from last year. I know few of my friends bought house this summer on 5 % down payment. I wonder if most people in calgary end of buying first house by doing 5% or 20% down payment.

[Maccalus]

I bought my first house 2.5 years ago with about 14% down payment.

My friend just bought one with a 20% down payment.

There is my anecdotal input.

[DownhillGoat]

I'm going to guess based on purely anecdotal evidence that it's a small percentage of people that put 20% on their first home.

Personally, I did around 10-11%. Wish I'd waited and done the 20%, but I got an unreal deal on the house so it'll likely come out in the wash.

[MoneyGuy]

My son just bought his first house. He had about 8-10% down and we made up the difference through a gift and a loan to get him to 20%. He doesn't know it yet but we're going to forgive the loan and give an equal gift to his sister.

[YYC in LAX]

We did approximately 14%. 20 would have been nice but wasn't possible and we wanted to jump on the opportunity rather than continue to save as housing prices keep climbing.

[FlamesAddiction]

Not in Calgary, but we did 10% even. We could have stretched it and did 15%, but it would have left me a little nervous with my personal cash flow.

It seemed to me at the time that the CMH savings are optimal when you either hit 10% or 20%.

We were a little rushed though as the condo we rented was sold the day it went on the market, and we would have had to have moved to a temporary place (and probably sign a lease), paid rent there plus moving expenses, and then would have had to move again later when we bought a place. Probably could have gotten up to 20% if we had a couple more months.

[cDnStealth]

I recently bought my first place, a condo, and put 20% down.

[Brewmaster]

I am saving up to put 20% on a new condo that should be done around year end. Not sure if I will get to 20% but the savings by avoiding CMHC are quite substantial. Going the pre-build route isn't for everyone but it's given me the chance to save up a higher down payment and capture some of the recent increases in pricing.

[WinnipegFan]

My first place was a condo and I bought it with 10% down. This in hindsight was a mistake, my first house I saved and saved and waited and put 35% down. This is a key amount as it allows you to do a secured line of credit instead of a mortgage. I saved over 100k already in interest by using this method versus the mortgage route. If you can hold off and make it to 35% down it is ideal. However, in this market that is a large amount of money. If you want more info about this PM me and I can show you the breakdown and explain your savings. Mortgages really are for banks to make money.

[REDVAN]

My wife and I purchased our first home recently, and we are putting down about 10%.

[ranchlandsselling]

Originally Posted by WinnipegFan

My first place was a condo and I bought it with 10% down. This in hindsight was a mistake, my first house I saved and saved and waited and put 35% down. This is a key amount as it allows you to do a secured line of credit instead of a mortgage. I saved over 100k already in interest by using this method versus the mortgage route. If you can hold off and make it to 35% down it is ideal. However, in this market that is a large amount of money. If you want more info about this PM me and I can show you the breakdown and explain your savings. Mortgages really are for banks to make money.

That's not necessarily true at all.

Here’s a situation I witnessed, someone bought a house with 5% down at a price of $460k +/- got a sub 3.0% fixed rate vs. HELOC rates at the time that were prime +.50 (so 3.50%).

Not to mention the opportunity cost of having 35% of the house value in cash tied up, they put $23,000 into the house vs. $161,000 (your 35% example). In the 18 months since they purchased their house it's likely gone up by about $100,000 (ridiculous I know, although I wouldn’t be surprised to see that equity vanish), but they’ve also got $160,000 invested, $70K of which is in a TFSA and $90k in a margin account that is then leveraged and and using about $30k in margin and paying an even smaller rate than your HELOC rate. That's 190,000 earning vs. tied up in a house.

What are they out by putting 5% down? The CMHC fees, the interest on the borrowed money, and.... Not sure what else. But if they waited to save an additional $138,000 they’d be renting for 5 years, prices would likely have increased, rates would be higher, and we'll see what the TFSA and Margin accounts have earned in that time. Given the power of the TFSA I think they’d just be ahead on that account alone and not paying taxes.

Even at fixed rates higher than 3.00% the situation remains the same as the money is better invested elsewhere (as long as they’re not stupid) than saving 2.89% over the next few years.

I’ve just done a deal for someone who’s buying an over $1.2 million place and they’re putting the minimum (20%) down as they don’t want to tie up more than 240,000k when the cost of capital is so damn cheap. They wanted to do the HELOC route (as that’s what they did on the last house (80% LTV)) but the change down to 65% meant he had to tie up $420,000, $180,000 that would earn better than the 2.50% mortgage cost elsewhere so he went traditional mortgage. They wanted to do CMHC and put down 5% but CMHC killed the million plus program.

Not the case for everyone, but blanket statements like “mortgages really are for banks to make money” is simply not true.

And if you mention that not everyone has the ability or wherewithal to invest their money I’d argue that if they can save 35% down and use a HELOC responsibly then they most likely do have the wherewithal to manage the funds better that putting all that cash into a house.

I don't think my examples are for everyone, but also don't agree with your statement that 35% downpayment and HELOC is the best way to go... Banks aren't stupid, they make money of HELOC's and the reason they're priced higher is to account for some people who pay them down and the flexibilty of paying them out whenever.

[rayne008]

We put down 5% when we purchased 5 years go. It would have taken us at least 2 more years of savings to get to 10%, and who knows how long to get to 20%.

I think we made the right decision as described by ranchlandselling, but I can see how it'd be easy to be discouraged by the examples of huge downpayments in this thread.

[Baxter Renegade]

Originally Posted by MoneyGuy

My son just bought his first house. He had about 8-10% down and we made up the difference through a gift and a loan to get him to 20%. He doesn't know it yet but we're going to forgive the loan and give an equal gift to his sister.

I wish my folks were as generous as you... Good on ya mate!

We're in the midst of purchasing. As a first time buyer, I believe we qualify for a 5% down payment. That being said, we will obviously be looking to put as much as possible down to save on gnarly interest.

We're kind of torn though... Something has to give in the housing market, no? So much available, such high average prices, average salaries nowhere near par for the course... We're thinking of waiting a couple more years at least for this bubble to burst.

[Rathji]

We put 5% down.

We had more than that available, but we put it into other things like landscaping, fencing and we were going to put a garage in but it never happened due to a few factors.

[brocoli]

Just shopping for our first house right now. 5% is the way that we are going.

I agree with Rathji in that we are using the extra to some upgrades in the house to get the equity out of it

[undercoverbrother]

Originally Posted by Baxter Renegade

We're thinking of waiting a couple more years at least for this bubble to burst.

Will it though?


For as long as I can rememeber the Calgary Market, hell Alberta market has been pumping along, even in "down" times like 2010 it was stong.

[Baxter Renegade]

Originally Posted by undercoverbrother

Will it though?


For as long as I can rememeber the Calgary Market, hell Alberta market has been pumping along, even in "down" times like 2010 it was stong.

Can never be sure... one thing's for sure though: the folks who know its going to happen will never let the general public know... What a clusterfata that would be.

[Baxter Renegade]

Originally Posted by fotze

I remember considering that very thing in 1997 then again in 2001, then again in 2008.

It is possible to time it right but time is better spent getting on with your life.

In 2005, I rented a nice little 3 bedroom townhouse here in Calgary... 800/month. He was also selling for 140,000. I decided against purchasing and rented. 2 years later, he booted us and sold for $300,000 almost immediately.

I'm still renting.... STUPID, STUPID, STUPID!!

[undercoverbrother]

Originally Posted by fotze

I remember considering that very thing in 1997 then again in 2001, then again in 2008.

It is possible to time it right but time is better spent getting on with your life.

Agreed

[burn_this_city]

We put 20% down on our townhome to avoid the CMHC insurance, if you're only a few percent shy it's better to scrap together enough to get to 20% to avoid shelling out for the insurance.