There are many reasons to rent. If you are renting because you are new to an area and want to check out the different neighbourhoods before purchasing your home, or perhaps you are in a job that has a short contract and then will be moving elsewhere, or even a retiree who has downsized and wants to use their capital for other things, then this information is probably not for you. However, if you are renting because you don’t have 5% to put as a downpayment on a purchase then read on.
Did you know that there are mortgage products out there that allow you to buy even without a downpayment*. The lender advances you an additional 5% as a downpayment and then takes it back by charging a slightly higher interest rate over the first five years of the mortgage term. Examples, based on current interest rates, show that for a home costing $300,000, a 5% deposit would be $15000, the difference in interest paid back over 5 years between the standard rate and the elevated rate with this product is $15,360. The $15,000 is the downpayment which you are just paying back and so the actual additional cost of taking this product is $360 over five years. For a $400,000 home the cost is $520.
So if you have had enough of renting and watching the property prices increase every year you wait, then this may be the product for you. Call or email for more information or to schedule an appointment to start checking out available properties right now.
Thanks to Chris Maxwell-Smith from Meridian Credit Union for the example data.