Client: Sarah, a first-time homebuyer in Ontario
Challenge: Limited savings for a traditional 20% down payment
Solution: Leveraging a shared home equity program to secure a home with just 5% down

Background

Sarah, a young professional living in Toronto, dreamed of owning her own home. With rising rental costs and increasing property values, she was eager to purchase a primary residence. However, saving a 20% down payment on a $600,000 Condo—$120,000—seemed unattainable. With only $30,000 saved, Sarah faced significant challenges entering the housing market.

The Challenge

Without a substantial down payment, Sarah was met with obstacles such as:

Mortgage Insurance Costs: Paying an added premium to insure her mortgage would increase her monthly expenses.
Losing Out to Rising Prices: Waiting to save more could mean higher property prices, making homeownership even less affordable.
Limited Options: Most conventional mortgages required a larger upfront investment, pushing homeownership further out of reach.
Sarah needed a creative financing solution to bridge the gap.

The Solution: Shared Home Equity
Through a shared home equity program, Sarah was able to purchase her primary residence with just a 5% down payment. The program provided a co-investment structure, where an equity partner contributed 15% of the home’s purchase price, helping her meet the required 20% down payment threshold.

Key Benefits of the Program:

No Monthly Payments or Interest: Unlike traditional loans, the equity partner’s contribution didn’t require monthly payments or accrue interest.
Avoided Mortgage Insurance: By reaching 20% down, Sarah saved on costly mortgage insurance premiums.
Profit Sharing on Sale: The equity partner’s contribution would be repaid, along with a share of the home’s appreciation, only when Sarah sold the property.

Implementation

Home Purchase Details:

Purchase Price: $600,000
Sarah’s Contribution (5%): $30,000
Equity Partner Contribution (15%): $90,000
Mortgage Amount: $480,000
This structure allowed Sarah to buy her dream home without waiting years to save a larger down payment.

Results

Immediate Impact:

Achieved Homeownership: Sarah became a homeowner sooner than expected, securing a home in a rising market.
Avoided Extra Costs: She bypassed mortgage insurance premiums, saving thousands of dollars.
Financial Stability: Monthly payments were manageable, and no additional interest was due on the equity partner’s contribution.

Future Scenario:

If Sarah sells the home for $700,000 in 5 years:
The equity partner will receive their original $90,000 contribution, plus 15% of the $100,000 appreciation ($15,000).
Sarah keeps the remaining equity and appreciation after paying off her mortgage.
* Sarah was reimbursed for the principal amount she contributed.

Conclusion

If you’re struggling to save for a traditional down payment, a shared home equity program can help you buy your primary residence with just 5% down. By lowering upfront costs and aligning with your financial goals, it’s a powerful way to step into homeownership without delay.

Ready to take the first step toward owning your home? Contact us today to learn how you can achieve your dream with 5% down!
Kindly let us know if you’d like us to assist with your qualification.