THE PROS AND CONS OF BORROWING MONEY FOR A DOWN PAYMENT

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THE PROS AND CONS OF BORROWING MONEY FOR A DOWN
PAYMENT
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• Borrowing money to make a down payment on a
  property isnt necessarily a bad idea, and in
  some cases, it can actually save you a lot of
  money.
• However, its important to note that this only
  happens under certain circumstances.
• Read on to discover some of the advantages and
  disadvantages of borrowing money for a down
  payment
• Pros
• You can get onto the market faster
• Sometimes, borrowing money can help you swiftly
  get on to the market while house prices are still
  close to an all-time high.

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• Rent money is no longer wasted
• Gone for good each time you pay it to your
  landlord or lady, your monthly rent cheque is a
  big chunk of your money. When you borrow money
  for a down payment on your own home, you can kiss
  goodbye to wasted money, and start earning in the
  form of equity.
• Build your wealth in the long term
• Despite the pandemic, home prices in Canada have
  continued to rise, and getting into the housing
  market now, could help you build up your wealth
  over time.

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• Make savings on mortgage default insurance
• Buying a home with less than a 20 down payment
  means that you must pay mortgage default
  insurance (CMHC insurance), and the premium you
  pay depends on the size of your down payment.
  Once you go past the 10, 15 and 20 mark, rates
  drop significantly.

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• Cons
• Costly repayments
• When you borrow money from a financial
  institution such as a bank, its highly likely
  that your interest rate will be much higher than
  that of your mortgage. If you then opt to cover
  your down payment with a cash back mortgage, the
  rate could be even higher, and you could end up
  paying a higher rate on the whole balance of your
  mortgage.

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• There are risk increases with lower equity
• Cushioning you in the event of unexpected repairs
  or loss of a job, for example, additional monthly
  debt repayments can be helpful. However, since
  you need a minimum of 20 equity in your home to
  be approved for a home equity line of credit, you
  might find yourself with fewer options available
  if youre not able to cover your costs with
  savings.

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• Additional debt can impact your debt service
  ratio
• Lenders determine your mortgage affordability by
  examining your debt service ratio, and if you
  take a loan to cover your down payment, this will
  undoubtedly not go in your favor. In many cases,
  the amount you can borrow for your mortgage may
  be significantly reduced due to the cost of
  paying back your borrowed down payment.
• Think carefully about whether borrowing money to
  pay for a down payment will have more pros than
  cons for you, and if youre in any doubt, you can
  talk to a financial advisor. For more detailed
  advice about the current housing market, talk to
  an experienced, local mortgage broker.

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• Red Key Mortgage is located in Calgary, Alberta.
  We are a boutique brokerage with high volume
  serving hundreds of clients locally and
  nationwide every year. We have a number of
  associates dealing in mortgages as licensed by
  the Real Estate Council of Alberta. As the best
  mortgage broker in Calgary AB, Red Key Mortgage,
  will provide all of your available options from
  the entire mortgage market and allow you to make
  an educated decision where you'd like your
  mortgage to go. Red Key Mortgage works with big
  banks in Canada, as well as over a dozen other
  AAA lenders. Best of all, our services are paid
  for by the lenders at no additional cost to our
  clients. If you are looking for a Calgary
  mortgage broker, contact us today! We can't wait
  to get started.