5% Down – Available to some purchasers but not necessarily advisable

Just say no to 5% down. Unless of course you’re a gambler or expect a steep salary increase in the short-term or some sort of windfall is on the horizon… Here’s a convincing Globe and Mail article on the reasons why a low down property purchase may not be a prudent decision.

Photo courtesy USACEpublicaffairs.

Purchasing with 5% down is most likely not for the faint of heart. If there is a market downturn a property owner could quickly be in a negative equity situation. If property values do start to decline we could see mortgage lending rules tighten up and the minimum down payment requirement could increase.

So here’s the simple point: If you have to stretch yourself financially to buy a new home, you’re probably not ready to trade in your landlord for a lender. If you do press forward with just 5 per cent down, be prepared to stay in your home a while – potentially a long while.

If you must press on with your low down payment purchasing plans make sure you have a contingency plan, or better, access to emergency funds. If you do make a purchase with the minimum down payment and run into trouble in the future, I’m here to help 🙂

I welcome any questions you may have about selling or buying.
Feel free to comment here or contact me directly.

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