Purchasing a home using a FREE DOWNPAYMENT mortgage VS renting: what is a better investment?

Published 21 January 12 04:16 PM | Merv Edinger 

FREE DOWN PAYMENT mortgages are available to you!       

Did you know that the FREE DOWN PAYMENT program from certain lenders is not only available to buyers, not just first time buyers, of single family homes but also those who are in the market for owner-occupied duplexes.

Profile to qualify:

  • A minimum credit score of 650
  • has a steady provable income, no down payment saved
  • Have funds saved for closing costs ( may be gifted to the buyer with a proof of the gift via a letter from the people giving the gift ). Closing costs are approximately 3% of the purchase price.
  • The property being purchased can be a maximum of 2 units & one unit must be owner occupied.

Now you may say, but why pay a higher interest rate for this mortgage option when I can continue to rent for another few years & save up my down payment? Here is why:

Say the average home right now sells for $200,000 ( a nice even number to make thinks simnple ) & if you rent a 2 bedroom appartment for $875 + utilities/mth.

If you bought a home today on the FREE DOWNPAYMENT program:

Purchase price $200,000 + CMHC fees of 2.95% = $205,900 at a mortgage rate of 5.29% = a monthly payment of 1231.28 approximately + taxes of a rough guestimate of $215/month for a total monthly payment of $1447.95. Now at a very conservative rate of market value increase of 3% per year, this $200,000 home would be worth $232,000 after 5 years to as much as $263,000 ( with a market value increase of 5.6% per year, based on the sales over the last decade ). So that could be over $57,000 in equity you would have in your home. Don't forget you will be paying down some of the principal during this 5 year period as well.

So if you rent for another 5 years, you will be paying someone else's mortgage. You may be thinking, but I can save the difference between that mortgage payment & my rent to put towards a down payment. Well let's look at that! If you are very good at restricting yourself & saving, you will have saved $34,377, but that $200,000 home is now worth $263,000. So your $32K that would have been a 17% down payment 5 yrs ago is now only a 12% down payment & perhaps interest rates have gone up in that 5 year time frame!!

For more information on this mortgage product & others, please contact Matt & Roger Wheeler of Nova Mortgages at http://www.novamortgages.ca. Note that these numbers were only used as examples. Please contact a mortgage broker for accurate numbers.

Please visit our website at http://www.MervEdinger.com for homes that may qualify for this program.

Halifax homes for sale - Remax Nova - Merv Edinger

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# Bethany said on November 19, 2017 10:08 AM:

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