Options for Home Downpayment?

[Ducay]

You could always start selling stuff......like airmiles

[Parallex]

Originally Posted by kunkstyle

Nope. Even if the downpayment is 'gifted' to you, I'm pretty sure they have to provide proof that it's not borrowed.

In that case RBC screwed the pooch on mine because that's exactly how we got ours. I think all you need is a Gift letter where someone says they gave you the money. Regardless, just ask your lender about their rules regarding gifting.

[sa226]

I think the distinction comes from what the government considers a traditional down payment vs nontraditional. I believe they think there is more risk associated with non-traditional sources for a down payment.

I think a gift falls under "non-traditional"

This is only scratching the surface of the matter, but I think that is the basis as far as the government is concerned, before you get all creative with the down payment.

[Sylvanfan]

Don't the new regulations that come out on April 1st where you need 20% in order to purchase a 2nd property to be used for revenue purposes? What does a house up there rent out for anyways. I've been sitting on the money I made selling my house in St.Albert two years ago waiting for the Okanagan market to keep coming down.

I know I'm waiting for these regulations to come out and pretty much kill any first time home buyers hopes of owning a property in this part of the world and cause prices to move down a bit more. I don't think most people have the 100+k sitting around to buy a house with. Than again I should have put that money in the stock market last March, but was too chicken!

[shermanator]

Originally Posted by Parallex

In that case RBC screwed the pooch on mine because that's exactly how we got ours. I think all you need is a Gift letter where someone says they gave you the money. Regardless, just ask your lender about their rules regarding gifting.

This is how I received my mortgage as well. To obtain the actual mortgage, I had to get a gift letter mentioning that the 20% would be transferred to my account. That was all I needed

[Finner]

Okay here's some answers from someone who has done a few mortgages:

The reason you need 10% down now is that the government changed rules on buying non principal residences from 5% to 10% down payment minimum.

Now assuming as you say your income is high enough to support both mortgages and fall underneath the ratios.

Downpayment can come from a variety of sources:

-Your own cash
-Borrowed sources providing that it's been sitting in your account for 30 days prior to approval (ie. we don't know if that lump sum of 15000 in your account from february came from a credit card/line of credit/etc.)
-Your parents via a gift letter. Basically they have to "gift" whatever additional funds you need and sign a letter saying they aren't expecting payback. Of course you can do whatever you want. Commonly we see people take cashback mortgages, get a gift letter, then pay whoever lent them the funds back.

You cannot use rental income unless you have a signed lease agreement and even then the bank will only allow you to use half the rental income as actual income for the purpose of the application.

[Deegee]

The seller could give you a mortgage for 20% and the credit union/bank/private lender could give you a mortgage for 80%.

Example is $100,000 p/p. I am selling you my house for a rental.

Let's say you use your local credit union for the first mortgage of $80,000, and I give you a second charge mortgage for $20,000.

You meet your purchase price and you make payments to both myself and the credit union in the above example. If the market goes up you could always refinance and payout the second mortgage...

Originally Posted by Muta

Borrow against the house value of someone you know (ie. parents, friends) that have no or little mortgage. They will acquire the amount as a line of credit against their current property, they sign a check over to you, and you simply pay them back, with whatever arrangement you guys decide on. This usualyl results in lower interest because it's a line of credit as opposed to a mortgage. This is how I acquired my first property, it could probably work for you. Just make sure you trust the people you are borrowing this from, and they are stable where they are.

They could always do a collateral mortgage to a personal guarantee if they have equity elsewhere, and you make the loan payments as the loan is in your name, with the guarantor providing the collateral for the loan.

EDIT: In my example, you might not necessarily need CMHC, either, for your information...

[cmyden]

This thread is a living, breathing, personification of the Canadian housing bubble.

[Winsor_Pilates]

Originally Posted by cmyden

This thread is a living, breathing, personification of the Canadian housing bubble.

Can you expand on this?

[1stLand]

@MJK what type of property would you like to buy for $300,000?

I am in a similar situation as you are. I bought a brand new home in Edmonton and do not want to part with it, even though I moved to Calgary.
I worked for the builder that built it, so I got a bit of a deal and the house / equity is not 'under water'. Its just a nice house in a nice neighbourhood that I am hoping to keep for 15 or so years and then sell to help purchase a property in B.C

However, judging from your experience, if I was to buy another home in Calgary (which I would like to do in a year) I will be faced with a 10% minimum down payment.

Keep us updated on how things turn out.

[V]

A couple years ago I got a $30,000 unsecured loan from TD no questions asked. I don't know if they still do that.

You mentioned you paid off your truck. You could probably use that as collateral for some money too.

[Fire]

When the housing bubble bursts in Canada it won't be pretty.

[cmyden]

This thread is a living, breathing, personification of the Canadian housing bubble.

Originally Posted by Winsor_Pilates

Can you expand on this?

I really don't want to derail this thread with my thoughts on the Canadian housing market, but I just shake my head when I read statements such as 'I don't have the money, but I can afford a second home'.

It's the classic bubble mentality that's been around as long as there has been markets. The notion that an asset class is affordable only because it has a perceived never-ending increase in value and not based on fundamentals.

[MJK]

Originally Posted by cmyden

I really don't want to derail this thread with my thoughts on the Canadian housing market, but I just shake my head when I read statements such as 'I don't have the money, but I can afford a second home'.

It's the classic bubble mentality that's been around as long as there has been markets. The notion that an asset class is affordable only because it has a perceived never-ending increase in value and not based on fundamentals.

Well I can tell you in my case it's very simple. I have been very busy paying of other things in my life so I do not have a huge stash of cash in my account. We found a home we like and we know we can afford but we do not have $30,000 lying around becuase we didn't expect that the min. to buy now is 10%.

Call it bubble mentality if you want but without knowing my situation fully you really are not in a position to judge.

[speede5]

I was recently in a similar situation. We were in the middle of a flip when our 'dream' home came up. I used a minimum down payment and paid insurance on the new mort. (ouch), and sweated it out for almost a year. The risk is that you can't afford it in a few years. In 5 years you will have very little paid off on either property, the interest rate could be double and now they are not affordable. The propeties could even decrease which makes a refi difficult. All the other 'things' you have been paying off will depriciate far more than a home, so you could easily get yourself in a pinch.

That said, I'm sure you know your situation best. If you really think you can do it get away from the banks, go to a mortgage broker, find a self insured lender and they will most likely be able to get you in at 5% down. If your really confident, get a second on the property you have, you may need to have it appraised and hopefully it has apreciated a bit so you have a bit more equity than you think. Problem with that route is you have 3 payments.

This advise is risky, and I have to agree there are a lot of people doing this, contributing to an increased risk level of the overall market.

If you really want the house, sell your vehicle, buy a beater, cash in a few RRSP's, and use the cash for your down. The people who you see with the most success usually made similar sacrifices on the way up.

[fundmark19]

I am still fan of saying your new prop is going to be your residence 5 percent down and if need be make up some fake rental contracts to show your place is rented. HELLLO second house. All the people who keep complaining about everyone buying second homes who can't afford it the world is gonna end and your home price is going to fall and you will be on the hook. It's an investment. Every investment has risk! It is not hard to get your mortgages paid each month if you are smart about it.

[Jonrox]

Originally Posted by MJK

Well I can tell you in my case it's very simple. I have been very busy paying of other things in my life so I do not have a huge stash of cash in my account. We found a home we like and we know we can afford but we do not have $30,000 lying around becuase we didn't expect that the min. to buy now is 10%.

Call it bubble mentality if you want but without knowing my situation fully you really are not in a position to judge.

It doesn't seem to be getting much attention (even though it has been mentioned a couple of times), but you have only a month to close on your new property before you will be required to come up with 20% (by law - no way around it).

So basically you need to get something put together in the next few days to give yourself enough time to find a property, get inspections done, get financing in place, and close on it.

Your best bet is to go back to the bank and ask what sources they will allow. They should be willing to help you come up with a solution.

[VladtheImpaler]

Originally Posted by fundmark19

I am still fan of saying your new prop is going to be your residence 5 percent down and if need be make up some fake rental contracts to show your place is rented. HELLLO second house. All the people who keep complaining about everyone buying second homes who can't afford it the world is gonna end and your home price is going to fall and you will be on the hook. It's an investment. Every investment has risk! It is not hard to get your mortgages paid each month if you are smart about it.

So, you are suggesting fraud + risk = win?

[Pinner]

How much do interest rates have to move up before people can not make payments ?

Can you handle 10%-15% interest ? What did it get to in 1982... 18-19 % People don't think of that.

[Slava]

Originally Posted by cmyden

I really don't want to derail this thread with my thoughts on the Canadian housing market, but I just shake my head when I read statements such as 'I don't have the money, but I can afford a second home'.

It's the classic bubble mentality that's been around as long as there has been markets. The notion that an asset class is affordable only because it has a perceived never-ending increase in value and not based on fundamentals.

Well to be fair that is only part of the story though. Bubbles have to be fed by ever expanding liquidity...which is what is being curbed here with the new rules to come into force in a few weeks. While people have a propensity to want to buy real estate for investment purposes its all leveraged money. That can lead to bubbles (see the 2008 stock market for a quick primer on de-leveraging in case you missed it!), but it doesn't always.