December 11, 2020

Are you in the market for your first home but are finding it hard to come up with the down payment? Does it feel like you’ll never be able to save up enough for a 20% down payment on your first home?

Many young Canadians are feeling like they’re being left out of the housing market. I’m here to tell you that it can be done without an inordinate sum of money or decades worth of penny-pinching.

To illustrate this, I’ll share the example of how one couple I recently worked with was able to purchase a condo and save $20,000 by following my advice.

Leverage Your RRSP

The couple was initially planning on putting a 10% down payment on a condo. By coming to me, I recommended that we look into a federal government program called the First Time Home Buyers Plan. I explained that they could each take $25,000 out of their RRSP and apply it towards the purchase of their first home.

As an investment advisor , I found an institution to loan them money to invest into their RRSP, paid back over 10 years for $275/month. In addition, by completing their RRSP contributions before the March 1st deadline, they received over $10,000 in tax refunds from Canada Revenue Agency that was used to cover closing costs.

Avoid Hefty Fees

The money needed to remain in the couple’s RRSP for only 90 days. Afterwards, they had access to the loan for the down payment of their new condo. The money they had already saved was used to pay down their other debts and offer more flexibility in their first years of home ownership.

Most importantly, by accessing these additional funds, they were able to avoid the hefty CMHC insurance fees of $20,000 that would have applied had they put down a smaller amount.

Owning Vs. Renting — It’s Your Call

The couple’s monthly mortgage payment came out to $2,275/month while their RRSP loan came to $275/month, for a total of $2,550 each month.

Here’s the bonus: since $1,150 of the mortgage payment went towards paying down principal, reducing the amount owing on their mortgage, and building equity in their condo, owning a $500,000 condo was roughly the equivalent of what they were previously paying in rent ($2,550 – $1,150 = $1,400). At the end of the day, ask yourself how much are you throwing away in rent each month?

If you would like to discuss these strategies, and learn how you can save on your mortgage, gain access to capital, and avoid unnecessary fees, contact Kevin Bell today. Your better future awaits.

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