How to buy a home on a low income
How do I buy a home on a low income? This is a question many future homeowners are asking. Especially because since 2012, it is no longer possible to buy a house without a down payment in Canada[1]. Read on to discover five tips that will help you become a homeowner, even if you have a low income.
1. Create a savings strategy
Meeting with your financial advisor can help you put together a good savings plan. Increasing your contribution to the Home Buyers’ Plan (HBP) or to the First Home Savings Account (FHSA) is a great way to save up for that all-important down payment.
2. Take advantage of the Home Buyers’ Plan (HBP)
The Home Buyers’ Plan (HBP) is a federal government program that allows first-time buyers to take up to $35,000 out of their Retirement Savings Plan (RRSP) to put toward their down payment. However, this amount must be repaid over a maximum period of 15 years after the purchase of the property. For more information, visit the Government of Canada website.
3. Get an RRSP loan
Don’t have enough money in your RRSP? It is possible to take out a loan to access the HBP. This is called an RRSP loan. However, funds must have been in the RRSP for at least 90 days before you can withdraw them. In addition, certain conditions apply, including being a first-time buyer or having sold your previous property more than four years ago.
Do you plan to use this strategy? Make sure that the repayment of this loan is realistic for your lifestyle in order to avoid debt problems. Something to think carefully about!
4. Get help from loved ones
Money received from the family—commonly referred to as love money—can really help when buying a home on a low income. Whether in the form of a donation or an interest-free loan, this financial help can make your real estate investment easier. However, this option is subject to certain tax rules, so make sure you get informed to avoid any unpleasant surprises along the way.
5. Take advantage of municipal assistance programs
Several cities or municipalities offer home ownership programs to attract new buyers. Québec City, for example, offers financial assistance in the form of an interest-free loan equivalent to 5.5% of the price of the house to eligible families.[1] Visit the website of the city or municipality where you are hoping to find a home to find out about available assistance programs and eligibility requirements.
There are several other avenues that can be explored when buying a home on a low income. For example, leasing with a purchase option or acquiring a property with several buyers. Whatever the solution, buying with a real estate broker will always be the best choice to maximize your investment.
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See also:
5 Ways To Buy A House With No Down Payment
5 Ways to Help Your Child Buy a Home
The HBP, a tool to increase the down payment of a first property