In this article, we will talk about the best way to buy a new house and manage your down payment in order to pay less on your home mortgage loan and mortgage insurance.
First thing to remember: the higher your down payment will be and the lower your home will cost you in the long term. Everything depends on the way you decide to run… and sometimes, you are better to think a lot before to go.
For a house that costs you $200,000, if you can pay $40,000 on down payment (20%), your total home mortgage will be only $160,000 to clear. This is no interest to pay on equity of $40,000 in the 25 years term: it is $60,000 more to pay in interest only on a 25 years term and with an average interest rate of 6%!
The major problem for you is to find money for down payment and think about it years before you buy your home. There is unfortunately no magic in getting money for down payment, but here follow for advices:
- Do you have assets you can sell? If you could sell your second car… Do you have a trailer or a boat you do not use very often?
- You can get back money from stocks, bonds or mutual funds. But it is not a good idea if there are well invested and you keep it for retirement. The average interest you get from good investment is usually few percentage point higher than the value of housing market…
- Contribute to your RRSP and put aside the tax refund you get from the government.
- Find more income sources but live on the same salary. The differential will be good to put on your down payment and to lower your home mortgage loan.
- Of course, cut your spending habits: this is probably the better way to get a better financial situation, easily a good down payment.
- Are your loving parents can afford to financially contribute to your home purchase, even with a little loan? This could be better than offering you gifts for the next years!
- And so on… There are no limits to what you can imagine to pay your down payment!
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