It has become extremely difficult for first-time investors to get into the real estate market. Prices in certain major cities continue to increase at an alarming rate, rising interest rates and new government policies are making it harder for people to qualify for mortgages, and the rising cost of living makes saving up a down payment for a property more challenging than ever.
Luckily, there are some amazing programs out there that have been designed to help Canadians afford their first home. The list below should give you a head start in purchasing your first property.
Options for homes
Options for homes has been around for 30 years and has built more than 2,500 units in the GTA and has another 2,000 developments in the pipeline. OFH focuses on mid- and high-rise condominiums, and its model is based on offering purchasers a down payment assistance loan of 10% to 15% that is recognized by banks as equity. The loan requires no payments of interest or principal until you sell the property. You do not need to be a first-time homebuyer to qualify for the program – and you can use it multiple times – but you must live in the home as your principal residence, so don’t expect to use OFH as a way to land your first rental property.
New to the affordable housing scene, Trillium works with developers to meet housing targets set by GTA communities in order to receive positive consideration on planning approvals, development charge deferrals and relief from other requirements (such as levies, fees, taxes, etc.) to reduce costs and improve affordability. If you are interested in buying a home in a Trillium Housing development, you’ll need a down payment (minimum 5%) and a first mortgage approval. Trillium will then work with you to determine how much down payment assistance you’re eligible for. (At press time, this amount could be upwards of 25%.) Similar to OFH, the down payment assistance is principal- and interest-paymentfree until you sell the home.
Many cities around Canada have different types of down payment assistance programs. Every municipality has slightly different qualifying requirements, but most involve some form of income restriction, net worth requirement and maximum purchase price cap. Cities with great programs include:
• BRITISH COLUMBIA
BC Home Owner Mortgage and Equity
• CALGARY, AB
Attainable Homes Calgary Corporation
• EDMONTON, AB
First Place for First-Time Buyers
Headstart on a Home
• BARRIE, ON
Simcoe County Homeownership Program
• WINDSOR, ON
Homeownership Down Payment Assistance
• KITCHENER, ON
Affordable Home Ownership Program
• GUELPH, ON
Wellington Affordable Homeownership
Down Payment Loan Fund
• MONTREAL, QC
Housing of Montreal – Accès Condos
• NOVA SCOTIA
Housing Nova Scotia Down Payment
Keep in mind that for most of these programs, you don’t have to pay principal or interest payments on the second mortgage while you reside in the home. When you sell the home, however, you will have to pay back the funds, plus whatever the shared appreciation amount for that program is.
The cost of this shared appreciation could end up being more than what you would have paid for traditional financing – this is why these strategies and programs are geared toward people who want to invest in real estate but are unable to save enough for a down payment and are short on options. As with any investment decision, do only what makes sense for your individual circumstances.
Without these programs in place, I would not have been able to start my real estate investing journey. When I wanted to get into my first home, my parents weren’t in a position to help with my down payment, and the job I was working didn’t afford me the ability to save a lot of money outside of my monthly living expenses. Luckily, I stumbled across Simcoe County’s down payment assistance program. Through the program, I received a 10% down payment with no interest payments. (I had to come up with closing costs – roughly $5,000 for taxes and legal fees.)
This assistance allowed me to get into my first home in Barrie. After a few years, the home had increased in value by more than $100,000, which allowed me to refinance and pay back the down payment assistance – and I still had enough additional funds available to use toward a down payment on my next home. By keeping the original property and renting it out, I was able to take my first step toward becoming a real estate investor.
For many Canadians, getting into homeownership in today’s market can seem like an impossible task. Not everyone makes a six-figure income or has parents who are able to give them a large down payment with which to buy a home. But with some strategic financial advice and the assistance offered by the programs above, the dream of getting started on your path to real estate wealth may not be as out of reach as you think.
Matthew Varga has been working in finance and real estate for 15 years. He specializes in using alternative down payment assistance programs for homebuyers. Contact him at email@example.com or 647-518-2886.
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