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How young people can afford to buy a home
By Riki Unrau
Entering the real estate market in this day in age can seem like an impossible task for many young people.
With higher house prices demanding higher down payments it is no wonder many first time homebuyers are getting discouraged. However, if you find yourself amongst this group do not despair. As the old adage goes, where there’s a will there’s a way. Let’s go over some of the ways that young people are putting together their down payments.
RRSPs
If you are a first time homebuyer (you have not been on a title in four years or more) then you are able to take advantage of the government’s Home Buyer’s Plan. This entitles you to access up to $25,000 of your RRSP tax free to be used towards your down payment. If you are a couple and both of you are first time homebuyers then you could potentially have up to $50,000 for a down payment. The important thing to note is that this is considered a loan and you have 15 years to pay it back or else you will be charged the taxes. So long as you pay a minimum of 1/15 back every year then you will be fine.
The Bank of Mom & Dad
A very popular way young people are coming up with their down payment is via a gift or loan from mom and dad or an immediate family member. If your parents are in a position where they are able to help you out then this is a great way to afford your down payment without pulling out all of your savings.
Borrow It
As a last case resort, many lenders will allow you to borrow the down payment from a line of credit or personal loan. This new loan will need to fit within the parameters of the allowable debt but, if it does, then it is a viable option.
The Dream Home Can Wait
So many young people want to start at the top of the housing market with that glossy, brand new home up in the hills. But that home comes with a hefty price tag that will drive your down payment way up.
If you can afford this with ease then great! But the last thing you want is to be house poor and unable to live the life you want to. There is nothing wrong with starting in an older and/or smaller home and working your way up to something that dreams are made of. This way you can enter the housing market feet first instead of jumping head first into the pool. It is a great way to test out the experience of having a mortgage and the responsibility that comes along with it.
Of course there are other ways to acquire your down payment but these tend to be the most popular for first time homebuyers. The Home Buyer’s Plan provides other tax breaks as well which add to the affordability of your first home.
If you would like to discuss all of your options please give your favourite mortgage broker a call.
– Riki Unrau is a Mortgage Broker with Invis Williams and Associates, located at 828C Baker Street, Cranbrook, BC V1C 1A2 – 250-919-6402. For more try: rikiunrau.com
