Sourcing Down Payments
Saving for a Down Payment: Navigating the Waters of Southwestern Ontario's Housing Market
With housing prices rising in Southwestern Ontario, saving for a 20% down payment is becoming increasingly difficult. Even meeting the minimum down payment requirement can feel overwhelming for first-time homebuyers. But don't worry—here are the options to get you started.
Saving for Your Down Payment:
RRSP (Registered Retirement Savings Plan): This tax-sheltered account allows you to withdraw up to $35,000 for your first home under the Home Buyers' Plan, with no withholding tax. However, funds must be in your RRSP for at least 90 days before withdrawing.
TFSA (Tax-Free Savings Account): A flexible, tax-sheltered option without withdrawal limits or tax incentives, offering more freedom than an RRSP.
High-Interest Savings Account: For immediate access, ideal for making quick deposits on accepted offers, which contribute towards your down payment.
Family Gifts: Many first-time buyers receive financial assistance from immediate family (parents, siblings, grandparents), which is considered a non-repayable gift and can be seen as generational wealth.
How Much Do You Need?
For homes under $500,000: The minimum down payment is 5%.
For homes over $500,000: You pay 5% on the first $500,000 and 10% on the difference. For example, on a $600,000 home, the down payment is $35,000.
For homes over $1,000,000: A minimum of 20% down is required, with some lenders applying a sliding scale for higher amounts.
Navigating the Numbers
With multiple options and calculations involved, it’s important to consult a trusted mortgage expert to determine your affordability and down payment requirements. Starting early will give you a solid plan to reach your homeownership goal.
Start Your Journey Now
Whether you’re just beginning to save or already have some funds, meeting with a mortgage expert is the best first step. They can help you determine your buying power and set clear goals for your down payment. Happy sailing toward homeownership!
