A New Home for $7,500 Down?!?
The other day I was talking to a friend who was struggling with the idea of buying a home.
“Everything I found in my price range requires so much work to make it livable I just don’t think I can afford it,” he said.
“Either I have to pour a ton of money into it or I have to spending $300,000 on a new house and I can’t afford either.”
He was unhappy with the idea of continuing to pour his money into rent and wanted to find a way to make it work for him instead of someone else. He wanted an investment and buying a house seemed like a great option because every mortgage payment meant he was growing his equity.
“Have you thought about buying a condo?” I asked him.
It had never occurred to him. I explained to him he could buy a brand-new condo at The Lexington on 9th for a fraction of the price of a home and start putting his money to work for him.
For as little as a $7,500, five percent down payment he could own a new two-bedroom condo with mortgage payments of $685 per month. Even when you added the condo fees (which include water) he would only be paying about $875 per month…well under the average rental cost of a new condo or apartment. Add to this an annual property tax of approximately $2,200 or $183 per month.
“Think of it,” I said. “These condos are super well built, they have a ton of sound proofing so they’re much quieter than the average apartment or condo and you don’t have to do any mowing or snow shovelling and all your headaches like future repairs to the roof etc. are managed by your condo fees.”
There were a few perceived barriers to entry for my friend –
- He thought a new home was just too expensive for him
- He thought he would have to settle for a “fixer upper”
- He thought it would be too difficult to arrange financing
Buying a home can be a frightening prospect but it is often the unknown people are afraid of. Once we ask a few questions and do a little research the fear often vanishes, and we are left with practical steps to overcome the obstacles.
For instance, we mentioned earlier that a person could pay as little as five percent of the total cost of the home as a down payment to qualify for financing. According to the Canadian Mortgage and Home Corporation (CMHC) “If you want to buy a home with a down payment of less than 20%, you’ll need mortgage loan insurance. This protects your lender in case you can’t make your payments.” This mortgage insurance is already included in the monthly mortgage quote when you are approved for a CMHC mortgage.
By making a five percent down payment an option the CMHC has opened the door to home ownership to more people now than ever before.
That sort of deals with barrier one but what about my ability to buy a new home instead of a “fixer upper”? Fixer uppers are great – for the right person, but if you don’t have the time, skills, patience and finances to deal with such a home what are your options?
You could build a new home but for my friend and loads of others like him this was just too large an investment at this stage in his life.
That’s where the condo came in. With units selling for as low as $149,900, combined with a CMHC backed mortgage with five percent down and a 2.79 percent, four year mortgage from Access Credit Union or Royal Bank, he was ready to confront arranging financing.
It can be scary to walk into a bank and ask to talk to someone about financing. The good news is it is not nearly as painful as you might think. You can call ahead or just go in and ask to speak with someone about the possibility of a mortgage. A brief meeting with a loan manager will walk you through the basics by getting some information –
What is your current income?
What are your current debts?
How much are you hoping to finance?
That’s it in a nutshell.
My friend walked through the process and is now the proud owner of one of the condos at The Lexington on 9th and he loves it. His money is working for him by building equity (the difference between the value of his condo and the amount he owes) instead of paying rent.
To book a showing or if you have any questions call Peter at 204-823-0598. For related information check out the CMHC’s website at www.cmhc-schl.gc.ca.
For your peace of mind, we’re also part of the Manitoba New Home Warranty Program (MNHWP). Check out their website at http://www.mbnhwp.com/ to learn why you shouldn’t buy from just anyone – make sure their your builder is a part of the program.
You may have given up on the idea of investing in home ownership, but we’re here to tell you the dream is closer than you might think. Give us a call – we’re Hive Development Group and we’ll show you one of the units. We’re proud of what we build, and we think you’ll love what we’ve done with the place.
-Peter, Hive Development Group