How Can I Buy a House without a Deposit

Buying a house without having to put in any down payment sounds too good to be true, and the unfortunate truth is that it is. No money down mortgages, also known as zero down mortgages, are now extinct, and there is no way of getting around a down payment in current times.

There was no concept of no money down mortgages in earlier times – the previous generation needed to save at least 25% saved before they went to the bank for a mortgage. In 2006, Genworth Financial and the CMHC decided to introduce the concept of no money down mortgages – 100% financing for default mortgage insurance.  However, with global recession on the rise, they were forced to close down the offer for no money down mortgages. Around 2008, a variety of companies were still offering zero-down mortgages courtesy some clever manoeuvring, but the Office of the Superintendent of Financial Institutions (OSFI) shut the door on these type of mortgages for good in 2012.

While this might seem like a blow, there are many alternatives to a no money down mortgage, and buying a home does not need to be as hard as it might seem. As of September 2012, the minimum down payment is only 5%, and this amount should not be too difficult to raise. Most Canadians have been able to raise this amount, and you can do it too, by using a few simple tips and guidelines.

• Reach out to your family for help: Asking family for help could be a good way to raise that 5%. Most parents are happy to hear their children are looking to invest in a house, and are likely to be only too glad to chip in. Either way, there is no harm in asking – the worst that you might have to hear is a no.
• Cash in on your RRSP: Under certain conditions, the  Home Buyers’ Plan (HBP) allows people who have been saving for retirement to take $25,000 from their personal RRSP, and the same amount from a spouse.
• Cut costs and save: Tighten your budget to help raise the required money – buy only the things you absolutely need, and cut back on luxuries until you have the desired amount.
• Sell your assets: Consider selling assets you do not absolutely need. Assess the worth of all the items in your house, decide which ones you can do without, and sell them to raise money for the down payment.
• Look into other deals: If there is no other option left, and you just cannot seem to raise the amount of money required, you might consider borrowing the money from another source, like a line of credit, personal loan, or your credit card. However, save this as a last option, as borrowing your down payment could lead you into a lot of financial trouble.