Can't Save for a Down Payment for a House?
I often hear from people that they can't buy a house because they have to save for a down payment. To me, it makes no sense. As you wait, house prices keeps increasing, so you'll have to keep saving for a bigger down payment. The rule of the land is that house prices may go down, but it'll never crash because land is a scarce resource. Just take a look at what your parents or grand parents bought their house for. Can you buy the same type of house for that price? Probably not. You can probably buy a car for the price they bought their house!
You can't compare the real estate market with the stock market. It's not as volatile as the stock market. The real estate market is correcting right now and will stabilize over time. Sure, the economy is in the pits right now. But the interests are so low that this is probably the best time to buy a house. Five years ago, I was giving out mortgage loans with a 5.5-6.5% rate on a 5 year closed loan. I was preaching that this is the lowest its been since Elvis Presley. Well, I'm now writing loans for 2.1-2.9% 5 year closed rate. Trust me, you won't see these rates again because this is considered an emergency rate for the government to stimulate the economy. In fact, the Bank of Canada is being urged to increase the rates and to keep increasing it until next fall.
Here are a few options if you don't have the down payment
- Borrow Down payment: get a line of credit, borrow against your RRSPs
- Cash back mortgages: You can even get 8% cash back when you put 5% down
- Seller financing: why not ask the seller if they are willing to do a vendor take back
- some lenders will allow you to get a second mortgage behind their first mortgage
- Rent to Own: There are programs in which you can rent the property and have credit towards your purchase price.
