Lower down payment requirements available through insured mortgages (currently as little as 5% down) may help pave a quicker path to homeownership for prospective buyers, the bigger obstacle may be the additional debt many have to carry on a monthly basis.
For borrowers without any additional debt, home ownership is still very affordable in most areas whether they make a 20% or 5% down payment. However, borrowers with non-mortgage debt, such as student loans, car payments, lines of credit and credit cards, monthly home payments can become much less affordable.
So although lower down payment programs assist with home ownership, many borrowers are unaware of how much additional debt load can affect their qualification and affordability. They simply work to save for the minimum down payment and don’t pay much attention to overall debt load during the process.
What does all this mean? Simply, to ensure your home ownership plan includes debt management before you engage. It would take most young prospective homeowners 10 – 12 years to save for a 20 percent down payment. However, for a 5% down payment, most can do it within a couple of years. Yet, for some, when they attempt to qualify for a mortgage loan, they are surprised to find they qualify for a much lower mortgage amount due to the additional debt load.
Strategizing on the amount of down payment and what your other debt will look like at time of purchase should run concurrently. You should seek advice on how to structure other debt, or better yet, look at ways to re-structure other debt so that it becomes more affordable, and allows the fastest repayment model possible.
Can we assist? Of course we can. We have helped many would be homeowners with viable solutions and creative structuring to not only provide affordable homeownership, but also to provide the best cash flow situation possible.
Ready to get started? Give us a call at (905) 265-0246 or email us mortgages@thefinancialforum.ca
