Buying a house represents a very important transaction, especially when it is the first one, and that you’re not sure you can afford it. Indeed, the average cost for properties has highly increased during the last 15 years. During the same period, the rules for new home buyers have been enforced. Consequently, young households have more and more difficulties to get a loan, but still can keep looking towards a private mortgage.
One of the first things you need to buy a property, whether it is a house or a condo, is a down payment covering a certain percentage of the desired home.
The minimum down payment required by the banks is 5% of the sale price for a property of 1 to 2 dwelling units occupied by the owners, but mortgage insurance with SCHL or Genworth is mandatory for any loans with less than 20% down payment. Since the down payment cannot come from a loan, of any kind, you need to take it from your savings.
Thanks to the Home Buyers’ Plan (HBP), for example, it is possible to withdraw your funds, up to $25,000, from a RRSP account to buy a property. However, you must refund the sum within the next 15 years. Some cities, like Montreal, also offer municipal programs to help new home buyers.
If you don’t have enough savings, nor RRSP account, another way to have a down payment is to get a monetary donation from a parent, provided that someone in your family is ready to give you such a donation, of course!
Financial institutions grant you a mortgage loan according to your ability to borrow. The latter is determined based on your revenues, the debts you already have contracted, your credit score and the money available for your down payment. From this data, the bank will offer you a preapproval, if it deems you are eligible to a mortgage loan.
Unfortunately, a pre-approved loan is not a contract cast in stone. At any moment, the bank can withdraw its offer and decline the loan, if it considers you represent a risk too important. Meantime, if you already made a proposition of purchase, which was accepted, this might pull the rug from under your feet!
A private mortgage loan could then become the best solution available for you. Of course, the interest rates for a private loan are higher than those from a bank. But on a short or medium term, this will allow you to straighten your credit to mortgage your house with a regular bank.
At Clic Hypothèque, we are offering you a private mortgage financing flexible and on a short term basis, going up to 75% of the property’s value, to help you to get back on your feet when the banks refuse to lend to the necessary funds to acquire your first house.
We are private mortgage lenders offering alternative financing solutions suited for your needs. Our goal is to help you making your dreams come true while allowing you to get a better credit score. After that, you will be able to take a new mortgage with a regular financial institution.