Where to Get Down Payment Assistance if Government Programs Aren’t an Option

We often turn to government programs first when we need extra help for a down payment. These programs seem like a safer bet since they have government backing. However, getting assistance through a government program can sometimes be a long and complicated process. So, where else can you turn for down payment support if government programs don’t work out? Below, we will discuss all the options and break down the pros and cons of each alternative so you can decide what works best for you. Let’s get started!

Other Down Payment Assistance Options If You Can’t Use Government Programs

OPTION 1: Look for Alternative Down Payment Assistance Programs

The government is not the only one lending a helping hand to Canadian homebuyers. Many private organisations, employers, and lenders also offer down payment assistance. Here are some alternative down payment assistance programs you can consider –

Commission-Based Cashback Programs

Some real estate platforms offer commission-based cashback after you purchase a home with them. Basically, these platforms give back a share of the commission they earn by representing you during the buying process. The down payment assistance program, Tonsto, is one such initiative. This real estate platform gives homebuyers up to $50,000 or 2% of the home price. You can use this cashback to make the down payment for your new house.

Employer-Assisted Homebuyer Programs

Some employers offer down payment assistance to employees buying a house. This assistance might come as a loan, a grant, or a matching contribution toward your down payment.

Shared Equity Programs

These programs involve an investor who contributes a portion of your down payment. In exchange, the investor gets a share of your home’s future appreciation. 

Developer Incentive Programs

Some home builders offer down payment assistance to attract buyers, especially in pre-construction developments. The builder might cover a portion of the down payment, offer rebates, or include upgrades as part of the deal.

Credit Union Down Payment Assistance

If you belong to a credit union, you may be eligible for special loan programs or grants for first-time homebuyers.

Cashback Mortgages

Some lenders offer cashback on closing, which you can use for your down payment. But remember that this cashback is a mortgage, and such mortgages come with slightly higher interest rates.

Private Loans from Lenders

A few private lenders offer short-term loans to help cover your down payment. These private loans usually have higher interest rates and shorter repayment terms. So, carefully consider whether this down payment assistance is worth it.

Pros and Cons of Using The Alternative Down Payment Assistance Programs

• PROS
• These programs often have fewer restrictions on income, credit score, or first-time buyer status.
• Unlike government programs, you may get quicker access to funds through these programs.
• CONS
• Some programs come with trade-offs, such as repayment obligations or shared home equity.
• Cashback mortgages and loans can increase the total debt of a homebuyer.

OPTION 2: Co-borrow with Family or Friends

Co-borrowing means buying a home with a friend, family member, or business partner. You and the co-borrower would apply for the mortgage together and share the responsibility for the payments. This co-borrowing option is becoming more popular in expensive housing markets.

Pros and Cons of Co-Borrowing

• PROS
• Lenders may approve you for a larger mortgage due to the combined income.
• You and your co-borrower share the financial burden, making housing more affordable.
• CONS
• If the co-borrower stops paying, you will be responsible for the entire mortgage.
• Disagreements can arise about living arrangements, responsibilities, or selling the home.

OPTION 3: Use a Gifted Down Payment

Another way to fund your down payment is through a gift from a family member. Many lenders allow buyers to use a gifted fund if it comes from an immediate family member and isn’t a loan.

Pros and Cons of a Gifted Down Payment

• PROS
• A gift down payment doesn’t add to your debt.
• With this option, you don’t need to wait years to save every dollar for your down payment.
• CONS
• Money can sometimes create tensions or expectations between family members.
• Some lenders limit how much of the down payment can be gifted.

OPTION 4: Rent-to-Own Agreements

A rent-to-own agreement allows you to rent a home with the option to buy it later. Part of your rent goes toward your future down payment, helping you build equity over time. This option works well for buyers who need time to improve their finances before securing a mortgage.

Pros and Cons of Rent-to-Own Agreements

• PROS
• You get to live in the home before fully committing to buying it.
• The rent-to-own agreement locks in the home purchase price. So, this strategy can work in your favour if home prices rise.
• CONS
• You may end up overpaying for the property if home prices drop.
• If you decide not to buy, you may lose the extra money paid toward the down payment.

OPTION 5: Borrow From a Life Insurance Policy

If you have a permanent life insurance policy with cash value, you may be able to borrow from it for your down payment – a life insurance policy loan. This loan can be a convenient way to access funds without selling investments or taking on high-interest debt. The best part? There is no credit check, and you may be able to borrow up to 90% of the policy’s cash value.  However, you must understand how the loan affects your coverage and future payouts.

Pros and Cons of Borrowing From a Life Insurance Policy

• PROS
• Life insurance policy loans often have lower interest rates than personal loans.
• Some policies allow you to repay the loan on your own schedule.
• CONS
• If you don’t repay the loan, it will reduce the death benefit for your beneficiaries.
• Only certain types of life insurance policies allow borrowing.

Not Sure Which Option Will Work Best for You?

It’s okay – you don’t have to figure this out alone. A mortgage professional can guide you through your options and help you make the best decision based on your financial situation. They will closely assess your income, savings, and credit score to see what works best for you. They can also introduce you to strategies beyond what we have discussed that could be a better fit for you.

So, go ahead and reach out to a mortgage expert today. Make sure you don’t miss out on any opportunity that could make housing more affordable for you.