6 ways to buy a property with no money down

In Canada, it is not possible to acquire a house without putting a minimum of 5% down, since banks and lenders are not required to offer you a mortgage loan. Which means that for a property worth $400,000, you must provide an amount of $20,000. For a property worth more than $500,000, you will have to pay 10% instead.

The amount can quickly become impressive! But your dream of becoming an owner may not be that far away! Try the following options:

Rent before buying

Some houses and condos are rented with the possibility of being purchased by tenants after a certain time. This is a type of financing that can be interesting for those who do not have sufficient down payment. The tenant signs a contract committing him to pay an amount each month from which a percentage will be deducted which will eventually be used for the purchase. Together with the owner, you will need to determine the duration of the agreement and the terms so that everyone benefits.

Transfer your RRSPs

You have probably already heard of this possibility. This involves using the amounts you have put into a Registered Retirement Savings Plan (RRSP) account as a down payment. In fact, this is the only way to withdraw from an RRSP before retirement without losing money. More specifically, the RAP is a government program that allows buyers to use up to $35,000 of their RRSP to purchase a first home. If there are several buyers, they can all use this technique (if they are first buyers.)

The amount will be directly used for the down payment and must be returned in full after 15 years. Which means you have to repay a portion each year by adding a portion to your taxable income. Any minimal late payment may result in tax penalties. However, the first two years are free from this reimbursement!

The big advantage of “RAPer” is that you will not be taxed on the amount transferred, so you will have more in your pocket. Also, this action will have an impact on your taxable salary which may result in a tax refund.

Take out an RRSP loan to “RAP”

If you don't currently have an RRSP, you could still manage to “RAP” (see above), even if you don't have a penny in your account! In fact, you can take out an RRSP loan from your financial institution which will then be added to your RRSP, allowing you to use the HBP to buy your house. However, there are conditions: the amount must have been there for at least 90 days before it can be transferred.

Buy with people you trust

It is more and more common to see people buying in groups! Although this is often in the case of an intergenerational house, we also see friends or siblings embarking on this adventure. Together, their purchasing power is more attractive and it is also easier to raise the required 5% down payment. In addition, the sum of the owners' salaries represents security for banking institutions.

Using a loved one’s mortgage

The operation is simple, but represents a risk for one of the parties. The lender will use amounts already repaid on the property of one as a down payment for the other. Thus, the first property becomes equity for the lender who will feel more secure if the new buyer does not make all their payments.

Choose a municipality that wants to attract taxpayers

Quebec is vast and some cities are ready to offer financing programs to encourage new people to settle there. Very often, these are more remote regions. Moreover, there, houses are often more affordable, which becomes easier for everyone to become owners.

But there are also large cities that have set up homeownership programs, such as Quebec City and its Accès Famille Québec program. Under certain conditions, the buyer can receive financial assistance (which will represent their down payment) offered in the form of a loan without interest or payment. The City of Montreal also has its residential acquisition support program. The assistance granted for a new property is between $5,000 and $15,000. In the case of a second-hand property, a reimbursement of transfer taxes is possible. Several conditions apply, but you may be eligible!

However, in a context where mortgage interest rates are high as currently, it might be wiser for you to wait before signing an offer to purchase. To make an informed decision, consult a financial expert!