When purchasing a home most lenders require that the client have a 5% downpayment saved but some, including a few major banks, allow for the minimum 5% to come from borrowed funds such as an unsecured line of credit. To qualify for a program like this you need to have strong credit (650+), no late payments for an extended period of time and have strong employment history.
Now let me do a breakdown how much this is going to cost you based on an entry level single family home of $350000 at current interest rates.
Current mortgage rate – 3.09%
Line of credit – 9% (estimate)
Mortgage – $350000
Line of credit – $17500
Mortgage default insurance – $14000 (required with any purchase less than 20%)
Downpayment – $17500 (5%)
Mortgage Amount – $346500
Mortgage Payment – $1655.84
Monthly Line of credit payment (interest only) – $128
Monthly property tax (estimate) – $218.75
Estimated cost per month – $2002.59
When speaking to the benefits of renting versus buying, the obvious pros are having a sense of ownership, no landlord and complete control of your property. There are also major long-term economic benefits as well. Below you’ll find an estimate on how much equity you will have in your home after 5 years based on modest 2% year over year growth in property value.
Amount left on mortgage after 5 years – $297536.06
Estimated property value after 5 years – $385991.26 (based on a modest estimate of 2% YOY growth)
Equity in home – $88455.26
There are other things to take into consideration including the line of credit you opened up to purchase the property. Over 5 years if you only paid interest only it would cost you $7680, plus the $17500 would still be owing. If we factor this into your home equity, you would still be $63275.26 in the positive.
If you have any further questions about this please don’t hesitate to contact me by phone, email or text. Also if you are interested in getting qualified for a mortgage, feel free to fill out my online application @ https://secure.dominionlending.ca/?app=15608&lang=en
Thanks for reading,