Hey Vancouver, Canada! How do I fund raise my 20% down payment?

Question

I have good credit and can obtain a mortgage for the first 80%, for the remaining 20% I'm a bit perplexed.

I own a leasehold one bedroom, one den condo that's harder to finance than a typical freehold. Once I finally found financing (HELOC) for it, my partner backed out and did not wish to proceed. And so, I decided that I will obtain my own mortgage for the first 80%. I say 80% so I can avoid paying the mandatory mortgage insurance once you exceed 80%.

I have life insurance but I found out I can't borrow against it (as I've heard others do) for my downpayment.

Sorry if I've left details out, I am new to this. Any help that catered to the Vancouver, BC, Canada market would be helpful - thanks!

Roy N. · Answer

Jatinder ... be aware some of the advice being offered above is U.S.A centric and things will play a little differently in Canada. When dealing with residential financing in Canada, the only costs on a refinance (with the same lender) would be any pre-payment penalty on your existing financing; an appraisal of the property (you can usually convince the lender to eat this); and the cost to register the new lien on title (lender normally eats this as well). If you were planning to force equity and refinance a property shortly after acquisition, you would initially finance it with open terms (no penalty for pre-payment) or a variable rate note (penalty is 3-months interest).

Julie Toh · Answer

@JT Athwal Getting a mortgage for a leasehold property is not any more difficult if you know which lender will finance it. If you're purchasing this as your principal residence, the source of your down payment from be from your own resources e.g. savings, RRSP or gifted from your closest relatives.

Tommy Adeoye · Answer

The most important area to identify is whether or not you have a deal at hand. Analyze your deal in details, that's the key, the foundation , your bread and butter. If you are certain you have a deal, find a private lender on here - connect with as much as people as you can and let them know your current situation. Make sure you know exactly what you have in hand before pitching to your potential investors(private lenders).With decent credit your bank should be able to work some sort of unsecured loan. If you posses any- your stock investment portfolio sometimes can be used as collateral - I don't how that is going to like amid the current situation. Your vehicle/car can be used for a collateral loan,if it's paid off or you have positive equity in it. Friends, Family, significant other,ex-girlfriends(if you promise to pay them back with interest) perhaps?How about a second mortgage on a property? I would not advise this in anyway except as a last resort and only if you are that desperate and expect a positive cash flow , a credit card may come in handy - I really will advise against this . Another option will be pay the mandatory insurance for a short while and refinance the loan 90 days after with the 20% DP - assuming by then you would have figured out a creative way to raise the cash. They are numerous ways to come with creative financing and if you keep digging in this forum alone, you come across novel ideas. Good luck and stay in the saddle.

Benjamin A Ersing · Answer

Benjamin A Ersing · Answer

@Jatinder Athwal lots of responses here about hard / private money, it’s a good route just be aware that most are short term lenders looking for quick fix and flip / refi deals, not long term buy and hold. So if you want to go that route, you’ll need to find a property that needs significant rehab, and make sure that when fixed up it will comp as high as you need it to to pay off your private lenders. They often charge high single digit to mid teens interest rate, and expect a return of capital in 6-12 months. So you’ll want to consider whether you can turn a house and refi it that quickly; and whether the refi value will definitely be high enough. If you get a bad appraisal upon refi, you may be stuck needing to pay the private lender out of pocket, or risk losing the house to them.It’s definitely possible, not trying to deter you, just providing tidbits I wish I knew when I first started.

Benjamin A Ersing · Answer

@Jatinder Athwal its a good idea, just remember that it costs a few thousand dollars to refi. You may be able to roll the cost in to the new loan, but you may not. Depends on the home value.

Benjamin A Ersing · Answer

@Jatinder Athwal you could borrow against the life insurance for something else that you would have paid for out of pocket, and reallocate those funds you’ve now saved towards the down payment.

Roy N. · Answer

While it does happen - investors negotiate acquisitions of properties with "no money down" - it is rare, especially in a tight market where properties are selling easily. It is even more rare a conventional lender would be providing the financing on such a deal {but it never hurts to ask}. You may find private money - either on your own or via a broker - which will provide financing until you can force some appreciation and re-finance conventionally. Such financing comes at a price. No "out of pocket" is more probable when you are looking at a tired, unloved property, one in a bad location, a vacant property that cannot be financed, an (investor) vendor who wants to retired, etc. ... something that doesn't fit nicely into your traditional MLS listing ... and the owner is prepared to entertain an instalment sale or vendor financing {both of these action require a knowledgable vendor and/or a very good educational sale on your part}.

Julie Toh · Answer

@Jatinder Athwal Welcome to BP!

Jatinder A. · Answer

Wow - these forums are great. I am enjoying my first week here.@Roy N. or @Julie Toh , I would be curios to know if you've ever heard of any Canadians achieving no money down using "creative" financing? It is unfortunate that our opportunities are a bit limited compared to our friends south of the border but I still am hopeful that this can be achieved!