The down payment dilemma
Despite the urgency, with only $7,000 in savings at the time, Erin felt she didn't have enough money for a down payment. The timing became a dilemma for her: Should she wait to save more money for a house that would probably cost more in a year? Or, use all her savings to buy a house now – at the risk leaving herself with no funds for a rainy day or future expenses?
The answer came when Erin visited the new home of a friend, who had used the First-Time Home Buyer Incentive program to purchase her house. She explained how the shared-equity program gives first-time homeowners money to pay for a portion of their down payment.
Money for eligible borrowers
Erin decided to apply for the First-Time Home Buyer Incentive her friend had used.
The program provides an additional 5% (for existing homes) or 10% (for new construction homes). This helps first-timers lower their monthly payment, lower the mortgage insurance premium and qualify for mortgage financing. Because Erin had a decent credit score, met the program's income limit, and had a 5% down payment from her own funds, she qualified.
Erin received an additional 5% towards her down payment as she decided to look at purchasing an existing home. In addition to the down payment help, Erin doesn't have any additional payments related to the down payment incentive, as long as she doesn't sell or refinance the house. She will need to pay back the down payment incentive when she sells her home or after 25 years.
Let the house hunting begin!
Once Erin knew she was eligible for help with her down payment, she began her home search in earnest. She found a beautiful 1-bedroom, 1-bath condo. The price of the home was $125,000. Because she used the first-time home buyer incentive, she was putting less than 20 percent down. Thanks to the additional down payment assistance of 5 percent ($6,250), Erin successfully purchased her home in 2021.
'And I didn't have to use all my savings!' says Erin. Plus, she's built up equity over the last couple years due to home values going up and paying down the mortgage.
Aside from the financial perks of owning her own home, Erin enjoys other benefits. 'I've got so much more space for my money than when I was renting,' says Erin. 'And I like being a permanent part of the neighbourhood and getting to know my neighbours.'