Tips for getting a down payment on a property

Raising a down payment from scratch has gotten tricky with the rise in property prices in recent years. However, some resources remain available and are less well known. Do you know creative finance?

These are strategies that allow you to integrate your deposit in a less conventional, but also interesting way. Here are 6 creative funding sources:

1. Sales price balance: With the purchase of the property, a part of the purchase is paid to the seller and the remaining part, called the balance of the sale price, becomes a mortgage financed by the seller. An agreement is established between the parties with an interest rate and a repayment period to the seller, which allows for a lower capital outlay to close the sale.
2. Mortgage support: This is when the buyer takes over the seller’s mortgage and continues the seller’s mortgage payments. The buyer can save a lot of money when the seller’s interest rate is lower than the prevailing rates. However, the seller remains liable for the mortgage if the buyer defaults. The financial institution may agree to draft a letter relieving the seller of this liability if the buyer is a good candidate.
3. MSRP and HBP: Do you have RRSPs? You can use them under certain conditions to build up to a maximum of $35,000 per spouse: among these, you must not have owned a home for 5 years and you must repay your RRSP loan over up to 15 years without interest.
4. Capital donation: This is when the seller sells a property to a relative or their child at a reduced price to reduce the down payment. The difference between the actual market value and the sale price gives the value of the deposit thus recognized to the buyer.
5. Collateral Guarantee: This involves using the equity in another real estate – land or property – to pledge a down payment to match the down payment. Instead of building up a sum of money, we then post a mortgage security on another property to secure the down payment. This guarantee has the same legal force as a mortgage: it must therefore be repaid according to the same principle as the mortgage.
6. Lease-Purchase: In the event of financial difficulties or non-use of a bank loan, this alternative solution allows you to rent the property with a purchase option. A rental contract is signed between the parties and allows the tenant to acquire or not the property at the end of the lease. This option allows you to use the property by postponing the purchase. Mr Denis Robitaille, from Anges immobiliers, tells us that demand has increased by 700% per year for this product since 2020.

Advise

• Payables: The balance between income and debt may or may not work in your favor. Seek advice to reduce your debts.
• Source of income: A more stable source of income can help you qualify better.
• Association : Does a financial partner want to invest by your side to help you build the down payment for your project?