Buying a home but don’t have enough for down payment? You may have a new option
Viviane Nunes and her family of five were looking forward to moving into a new house in a development in Ajax last summer, but they ended up walking away from their $100,000 deposit.
“It was very difficult to have to do that,” said Nunes.
Last year when the real estate market shifted and home values started falling, her bank told the family the house they were planning to move into was reappraised and had dropped by about $200,000 in value.
Instead of staying the course and buying the home, Nunes said her family felt it was better to walk away from their $100,000 deposit.
“We ended up not pursuing the purchase, we lost the deposit and we still had some money saved, but not enough for the 20 per cent deposit to buy another home again,” said Nunes.
Faced with the chance they would have to rent, Nunes found out about a company called Ourboro, a Toronto lender that will co-invest up to $250,000 to help you reach a 20 per cent down payment.
In return Ourboro will get a share of your home's future appreciation.
"For us it was a way to buy something that we weren’t going to be able to buy on our own,” said Nunes.
According to this example, if you were to buy a $1,000,000 home and put a down payment of five per cent which is $50,000, Ourboro would put in 15 per cent, which is $150,000.
If the house sold in the future for $1.2 million Ourboro would get back its original down payment ($150,000) plus 75 per cent of the home's appreciation (75 per cent of $200,000 equals $150,000) for a total of $300,000.
Preya Kaur with Ourboro said “many of the people we deal with just don't have the funds for a down payment, so this is a way for them to have access to home ownership."
Kaur said homeowners don't pay interest on the down payment from Ourboro and are able to qualify for larger mortgage amounts. Currently the company is only co-investing in residential areas in Ontario that it feels are appreciating.
Some of those areas include York Region, Toronto, Peel region, London, Waterloo, Hamilton, Guelph and Durham Region.
Kaur said the program can help people who are stuck in an endless loop renting and trying to save up for a down payment.
“At least with Ourboro you'll be able to get into the market. Without Ourboro you’re stuck in the rental market, at least that’s the case with many homeowners that we work with," said Kaur.
Nunes said allowing Ourboro to contribute to her home’s down payment allowed her to get into a home and avoid paying rent and said she is willing to accept the company is entitled to some of her home’s future appreciation.
"I’m loving it. It's so great for us to have a place for our family to grow," said Nunes.
The co-ownership plan has other issues you would want to check into, but if you're someone who would like to buy a home and don't have enough money for a down payment it might be an option to consider.
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