Not a first-time homebuyer and want to buy with 5% down?

I had a realtor partner ask about down payment options for First-time buyers vs buyers who already have a property and thought I’d create this post. This is an excellent question and there is a lot of confusion when it comes to down payment.

There is a common myth that you need 20% down if you currently own a home or have purchased a home in the past. 

You can put as little as 5% down on a property if your intentions are to live in it. You MUST put 20% down if your intentions are to rent out the property that you are looking to purchase. 

Example: You purchased a condo, lived in it, and now want to buy a house and rent your condo out. This is completely OK, and you can use as little as 5% down. You are upsizing and need more space; the lenders are assured that you will be occupying this new house.

If you currently live in a house that you own and are planning to rent it out and buy a condo to live in, you must have a good reason as to why you are downsizing. The lenders/insurers want to ensure that you will not be renting out the condo you are looking to purchase. 

Example: You live in a house that you own but you need to move to another part of the city or country for work, education or to perhaps be closer to your family. You can put as little as 5% down because there is a good explanation. 

If you currently live in a house that you own and are looking to buy a condo up the street with 5% down, the lenders/insurers will immediately think you are trying to use it as an investment property and will decline your deal. Again, if your intentions are to live in the property that you are purchasing, you can put as little as 5% down, no matter how many homes you have owned or own. 

There are other instances where you can put as little as 5% down such as second homes that will not be rented out. 

Example: Your children will be living there as they attend university. 

Why is it important to speak to a Mortgage Broker? There are many factors when it comes to down payment so always speak to a Mortgage Broker. Also, every lender views rental income differently so having access to 65 lenders will ensure that you receive the highest purchasing power that is available.