The Gift!

by Darrin DeRoches May 12 - 18, 2011

In today’s real estate market it is hard to save up for a down payment. The government has taken away the 100 per cent financing of a property so you have to have at least 5 per cent of the purchase price as a down payment. If you have 20 per cent of the down payment you can avoid the “mortgage insurance” which is about $7,000 dollars added to the average house deal today.  You also have to prove where the money for the down payment comes from, meaning you cannot borrow the down payment.  Except for the “gift clause” which is a document signed by a family member stating they are “giving” you the money.  Just as it sounds the money is a gift – not a loan.     A gift of the down payment can be a great tool to save money.  Not only can you avoid “mortgage insurance” by increasing the down payment, you can negotiate a better rate for your mortgage with a larger down payment. In essence if you avoid the insurance and negotiate a better rate the money you will save over the course of the mortgage will pay back the down payment itself.  Let’s say your parents have money in a RRSP collecting little interest. They plan on letting the money grow to a point where they will be giving it to you as an inheritance.  If they took that same money out today and gave it to you as a “gift” this money will not only grow in value as the house does – you now own a home.  They will also be able to claim the money as a deduction and there is no tax on taking the money out of the RRSP when used to purchase a property.     The reason this all came to mind today is that I was contacted by a production company looking to shoot a pilot episode of a new real estate show for the W network.  The premise of the show is parents helping out their children throughout the process of buying a home. We are looking for buyers who are willing to be on camera throughout the entire process. It can also be children helping their parents downsize.  The production company will film the process and our company takes care of all your real estate needs. It will take about four days to shoot and they also pay a fee for your ‘appearance’ on the show which will aid in the down payment. This company has done Property Virgins, Property Brothers and the Unsellables.  So if you or someone you know are looking to buy property with their parents give me a call or email today and I will fill you in on all the details! Unique.  V     Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.