June 19th, 2009 | 
Author: 5 Down Vs. 10 Down A Comparison
It has always been an issue for home buyers to save their down payment. Many people on advice from various people wait to save 10 rather than moving into the home sooner with 5 as a down payment This is not always a good idea. Let me explain;
We have 2 young couples the Jones’ and the Smiths. They both have the same amount of money to spend on housing and saving (1000/month). From that 1000 they are paying their rent of 750/month and saving the other 250 for their down payment. In fact they’re identical people.
The Jones’ and the Smiths are both looking to buy a 100000 property. As such they will need 5000 as a down payment if they purchase at 5 down or 10000 if they wish to have 10 as a down payment.
To date they have both saved 5000 with which to purchase a property. The Jones’ have decided to buy now and accept that they only have 5 as a down payment The Smiths’ have decided to wait until they can raise 10; thus saving themselves some CMHC costs.
What the Smiths’ aren’t realizing is that while they wait the cost of the property is increasing… thus incrasing the amount of money they need as a downpayment.
They’ve also not taken into account that the money they are paying in rent is being thrown away while they could have been putting that against their mortgage.
Sure saving the CMHC fees is a good idea. But is it necessarily the right way to go? Not always.
If it takes the Smiths an extra 2 years to save up the extra money the property could have increased by as much as 15000 in that time…. meaning that they’d need more of a down payment as well as having a larger mortgage than if they’d bought earlier.
If you’d like to read this article in full including graphs showing the difference between the Smith’s and the Jones’ then go to our website at www.workingtogether.ca and review the article titled “5 Down Vs. 10 Down A Comparison”. You’ll get the idea; and possibly save yourself a lot of money!
About the writer:
John Carle Sharon Gregresh are Realtors with Royal LePage ArTeam in St. Albert AB. They pride themselves on providing more than just real estate sales and listings. Their clients benefit from a much larger spectrum or real estate services. Contact them any time at informationworkingtogether.ca or through their website at www.workingtogether.ca They can be reached by phone at (780) 4585595
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