Homeownership is a dream for many, offering benefits like building equity instead of paying rent, stability from owning your space, and the potential for a solid long-term investment.
However, for many Canadians, especially first-time buyers, the high costs of homeownership can feel out of reach.
As of June 2021, the average home price in Canada was $688,000, requiring a minimum down payment of $43,000 for a prime mortgage loan—a significant amount to save amidst rising living expenses.
To make buying your first home more attainable, we’ve outlined options to help supplement or replace your down payment.
These options include support from third-party institutions or other sources, enabling you to secure a mortgage without relying solely on your savings.
Buying a House with No Down Payment in Canada
Your local county First-time Homebuyer Assistant Program
The best option for buying a house in Canada with zero down payment is the First Time Homebuyer Assistant Program offered by local counties and municipalities.
Generally, the down payment assistance program will provide a 5% down payment.
Here are the essential qualification criteria for these down payment programs:
- You are a first-time home buyer; you have not owned a house in the last four years or have any interest in a home.
- The new home must be in the county and offer a down payment assistance program.
- You are 18 years of age and above.
- You plan to use the home as your principal residence, so you can’t transfer or lease it.
- You have been pre-approved for a mortgage.
Borrowed Down Payment Mortgage
If you cannot afford the required 5% down payment, an intelligent way to buy a house is to use the borrowed down payment mortgage program most traditional lenders offer.
Your liabilities will include the borrower’s required monthly payment as part of your monthly debt obligations.
This mortgage program allows you to use personal loans, credit cards, lines of credit, etc., for your down payment.
The required monthly payment of the borrowed portion of your down payment will be included in your liabilities.
Therefore, your income must be sufficient enough to cover the monthly costs of the borrowed down payment.
Gifted Down Payment Mortgage
You can also buy a house with a gifted down payment from an immediate family member.
An immediate family consists of your parents, siblings, and children.
Most lenders do not consider your spouse an immediate family member. However, with or without your spouse on the title, they still have a few rights to the property.
Lenders prefer the spouse to be on the property’s title to prove the mortgage.
The gifted down payment mortgage program allows you to buy a house without necessarily saving for the down payment.
The money gifted must be non-refundable.
Use RRSP Loan
If you are a first-time homebuyer, you can use the Registered Retirement Savings Plan (RRSP) to buy your dream home without the stress of pulling money from several sources to fund your down payment.
You can borrow up to $35,000 from your RRSP for the down payment. For couples, you can borrow up to $70,00 from your RRSP.
The first-time homebuyer RRSP program allows you to borrow money from your RRSP investments without paying taxes for your house purchase. You have up to 15 years to repay this money into your RRSP account.
Conclusion
Increasing housing costs can make saving for the compulsory down payments on your dream house challenging.
However, government incentives, programs, and lender products can help you cover the cost of this down payment.
While this means paying zero down payments or less than you ought to pay, it is not always the best option.
Thus, it would help to speak with a mortgage planner or financial expert before deciding how to pay your down payments.
