Home Buying and Mortgages
7 creative ways to come up with a down payment
Is home ownership in your future? We're here to help you think about where the money will come from.
By ATB Financial 22 October 2021 3 min read
It would be so much easier to buy the house of your dreams if you didn’t need cash down. Whether you’re saving for your first mortgage at five per cent down, or an uninsured mortgage at 20 per cent down, that’s a whole lot of money for most of us to come up with. And it often surprises new home buyers.
When you're ready to buy, you can shop for a mortgage rate that works for you. But you may still need a little help to come up with that initial down payment. Here are seven ideas of where that money could come from:
1. Turn sippings into savings
Cutting back on that extra latte could save you some cash.
Your everyday latte or take-out lunch may add up to thousands of dollars over the long run. Cut back on routine luxuries to accelerate your saving—especially if you start early and have time on your side. Better yet, why not earn interest on your savings? ATB Tax Free Saver Account (TFSA) pays you a premium interest rate and allows you to grow your savings tax free.
2. Be your own banker
Your RRSP can be used to help you with your downpayment.
The Government of Canada’s Home Buyers’ Plan (HBP) allows you to withdraw up to $35,000 per person from your registered retirement savings plan (RRSP) tax-free to buy or build a home if you qualify as a first-time homeowner. It’s like giving yourself an interest-free loan.
You’ll have to repay this amount back to your RRSPs within 15 years. There are some other conditions—check out Canada Revenue Agency’s Home Buyers’ Plan for more details. And if you don’t have retirement savings, now may be a good time to start thinking about that too.
3. Liquidate to accumulate
Liquidating some of your investments can help you find that down payment.
Do you have stocks, bonds, or mutual funds that you could sell? Talk to your tax professional first to make sure you won’t have to pay more tax than you need to, but selling investments may be a good way to get your hands on down payment cash.
4. The life-changing magic of selling your stuff
Selling some older, less-used valuables could help you find some coin.
Whether it’s a second car, a record collection, an old laptop, or an unused treadmill, you probably own some valuable things that you don’t use much. They could represent a good chunk of change for you. Not only will you earn some coin, you’ll also free up space, which means less stuff to move when you do find your perfect home.
5. Get by with a little help from your family
Gifted funds from a family member or friend can be used for your mortgage.
Most lenders will allow you to use gifted funds from a family member for a down payment. Your mortgage provider will ask you to provide a signed letter stating that the funds are a gift and don’t need to be paid back.
6. Rent money, not real estate
A loan or line of credit can help you with your down payment.
It's possible to borrow up to five per cent of your down payment. A personal loan or a personal line of credit could be options that work for you—just keep in mind there are some restrictions.
7. Turn play into pay
A part-time job could turn a hobby into some cash.
Earn more, and put the extra money towards your down payment. Look for a part-time job that suits your lifestyle and interests. You never know—maybe you’ll find weekend work doing something you love!
In most cases, you’ll have to show pay statements that prove you have the necessary money in your bank account for 90 days prior to your closing date. So take some time to think everything through and make sure your finances are in order before you jump into the home-buying process.