Where to find a down payment?

Finding a property to purchase is one of the more exciting things one can undertake. Whether is your first home, a recreational piece of property, or an investment in the real estate segment, acquiring property is a solid financial step that often pays dividends in the future. If you’re not awash in cash, however, you may find yourself caught between wanting to buy that property and taking a step back because you don’t have the money for a down payment.

If you think creatively, there are some ways to raise money for a down payment. Here are some tips from Rakhi Madan:

  1. Use your RRSP – in Canada, the RRSP (Registered Retirement Savings Plan) allows you to to withdraw up to $70,000 if your a couple, or half that if you’re an individual. By 2020, divorce individuals can also avail of this facility. Use of this fund is tax free, but you must submit a repayment plan that ensures that the amount you withdraw from your RRSP is repaid in 15 years.
  2. Use you tax free savings account (TFSA) – for Canadians, this special account is exempt from taxes for whatever earnings the account earns. Currently limited to a $6,000 contribution annually, the amount in the TFSA can be used for any purpose. If you have started a TFSA at 18, you would already have an amount that can contribute to that real estate down payment.
  3. A financial gift – either from parents or a blood relative, a financial gift can contribute a huge amount to you down payment needs. All you need to do is to fill out a form stating that this amount is a gift and does not need to be repaid.
  4. Inheritance – very similar to a financial gift, and inheritance from your parents or grandparents could contribute greatly to your down payment requirement. Especially if you’re buying real estate, many of these relatives are quite open to giving you inheritance even while they’re still alive.
  5. Stocks, bonds, and mutual funds – liquidating these assets to raise the money for a down payment is also another option. Weigh the pros and cons carefully, and if you see that giving up all or some of your investment portfolio to acquire a piece of property gives you an advantage, then do so. Note that sales of these assets will have to be properly documented.

As we’ve seen, raising money for a real estate down payment is not a very difficult task. Sure, you may give up some liquidity and lifestyle choices for the moment, but investing in real estate pay dividends down the road.

Contact your Brampton mortgage broker today.