How Can You Get Down Payment Assistance?

Saving up for a house can be a significant challenge. Between high student debt, challenging credit score requirements, and the ballooning cost of living, many Canadians have difficulty setting aside money to afford a house.

Fortunately, lenders recognize this problem and have been offering down payment assistance programs. These programs help Canadians afford their first down payment. They are typically shared equity mortgages which means the lenders will share the upside and downside of your property. There's usually a waiting list for these programs, and successful applicants will receive 5-15% of the property value to use as a down payment. The catch is that the percentage generally must be paid back after 20 years or when the property is sold. Many homebuyers can benefit from these helpful programs if they meet specific requirements.

Down payment assistance programs typically have strict qualifications. They are designed to help low to moderate-income families afford a house. There are strict qualifications. In general, to qualify for this program, you must;

• Have a low to moderate household income (typically less than $100 000)
• Buy a house below a maximum price (normally less than $500 000)
• Pre-qualify for a mortgage
• Be a legal resident of Canada
• Intend to use the house as a primary residence
• Usually only for first-time homebuyers

However, each municipality has different requirements to suit their local needs better. These requirements and programs are constantly changing, too, so it's best to review the links provided to double-check.

If you qualify for down payment assistance, the next step is to research the options available to you. Below is a list of the programs offered federally and by municipalities in some provinces. As mentioned above, always double-check to ensure nothing has changed with the program. If you do not qualify for any of the options and aren’t a first-time home buyer, then contributing to your TFSA can be a good option to save for a down payment.

The First-Time Home Buyers Incentive is a shared equity mortgage that makes it easier to buy a home while lowering monthly mortgage payments. It allows you to borrow up to 10% of the purchase price to use as a down payment. However, you must pay back the same percentage of property value when you sell or after 25 years. As the name suggests, this program is only meant for first-time home buyers.

The government shares the upside and downside of your property value. Imagine you buy a property for $400,000 with a 10% loan from the FTHBI. If you sell the property after ten years for $500,000, you owe the government 10% of the property value. This would translate to $50,000 (500,000 * 10%). Although you save on mortgage interest initially, you will need to pay more down the road.

Ourboro offers home co-ownership, where they co-invest in your home by contributing 5% up to 15% of your home's purchase price as a down payment, up to a maximum of $250,000. Your ownership share is based on your percentage of the down payment contributed. If you make a 5% down payment and Outboro makes a 15% down payment, then you would have a 25% share of your home's appreciation.

Currently, Ourboro is only available for homes located within the Greater Toronto Area (GTA) and parts of Southwestern Ontario, such as Hamilton and London.

Ourboro is currently available in:

• Toronto
• Peel Region
• York Region
• Halton Region
• Durham Region
• Dufferin County
• Simcoe County
• Guelph
• Kitchener-Waterloo
• London
• Hamilton

From completing an application to closing on a home, co-buying with Ourboro can take 2-4 months. Much of this time is taken up by the mortgage pre-approval and home search process, which would be the same for any traditional homebuyer.

The minimum down payment that you’re required to contribute is 5% of the home’s purchase price. You’ll also need to fully cover all closing costs, except land transfer tax. In the case of land transfer tax, the amount you’ll have to pay is split according to your stake in the home. Ourboro works with Equitable Bank and Community Trust as their mortgage lending partners. You will need to use one of Ourboro's lender partners through their third-party mortgage broker.

Ourboro requires you to pay them back within 30 years. However, you can always choose to buy out Ourboro’s share at any time. This means buying out Ourboro's share at market value. That’s a longer time period than Lotly, which requires you to pay them back within 10 years. This could be done by selling the home or by using your own money. If you do sell the home, the principal that you have paid down on the mortgage is yours to keep, no matter what happens to the home value.

The maximum amount that you can lose with Ourboro is your initial down payment and the amount that you have paid towards your mortgage principal. If the home’s value decreases significantly, you won’t owe Ourboro any additional money beyond these amounts.

Share of Future Property Appreciation With Ourboro

Source: Ourboro

Lotly matches you up with investors so that you can buy a home with a smaller down payment. With Lotly, you'll only need a 5% down payment. Lotly investors will contribute up to a 15% down payment, or up to $250,000, so that you’ll make a total down payment of 20% of your home’s purchase price. This allows for your mortgage to be uninsured, saving you on CMHC default mortgage insurance premiums. You will have to pay back the investors within 10 years, either from your own money or by selling the home.

Homeowners that buy a home with Lotly will still share in the appreciation of the home. Their split of the appreciation is based on how much they contributed as a down payment. This starts at 51% of the upside (or downside) if you make a down payment of 5%, and can go up to 84% of the upside (or downside) if you make a down payment of 15%. Homeowners will also keep the home equity built by paying down their mortgage principal, as well as keep their initial contribution amount as home equity. Investors will share the remaining appreciation, or depreciation. This means that if your home value falls, Lotly investors will share in the loss as well.

Share of Future Property Appreciation With Lotly

Source: Lotly

For example, if you make a down payment of 5%, then you’ll get 51% of the home’s price appreciation. If your home value goes up by $100,000 in five years, then your equity would have increased by $51,000, not considering your mortgage principal payments. Investors would own the remaining $49,000 of that increased home value.

If home prices fall significantly, the most you would ever lose is your down payment.

Currently, Lotly is only available in the GTA, Kitchener, and Waterloo. There is a waitlist to join Lotly.

Both Lotly and Ourboro help homebuyers with their down payment for a primary residence, up to $250,000, with homebuyers only needing to save 5% for their down payment. Lotly requires you to buy out their shares after 10 years, while Ourboro has a longer time period of up to 30 years. Lotly also only operates in the GTA, while Ourboro has expanded to other areas of Ontario. This means that Ourboro has a wider geographical reach than Lotly, giving more property choices.

A significant difference is the stake in your home’s price appreciation. With Lotly, you’ll get a 51% stake by making a 5% down payment. With Ourboro, a 5% down payment will give you only a 25% stake. In both cases, the maximum amount that you can lose is your initial down payment. You can sell the home at any time with both programs, or buy out their share, so you’re not locked in.

Buyer's Stake Based on Down Payment

Down Payment	Buyer's Share with Lotly	Buyer’s Share with Ourboro
5%	51%	25%
6%	54%	30%
7%	58%	35%
8%	61%	40%
9%	64%	45%
10%	68%	50%
11%	71%	55%
12%	74%	60%
13%	77%	65%
14%	81%	70%
15%	84%	75%

Down payment assistance is a program that helps you afford the down payment of your home purchase. The shared equity model decreases your monthly mortgage payments but can increase the amount you pay when you sell your house. Another strategy to help afford a home is to partner with a spouse or friend through a joint mortgage.