“You know how we said we’d likely look at buying a home in a couple of years?” Stuart asked. “That’s been moved up a bit – we’re thinking likely by the end of this year now”.
I grinned as I sipped my coffee. I was with my two physician clients at our favorite coffee spot and they were looking a little sheepish.
I was genuinely happy for Stuart and Christine, and wasn’t surprised that they’d moved up their timeline. In twenty years of working with doctors – when a client tells me they’re thinking about buying a home in the next few years? Experience tells me we need to start lining up their down payment.
Because let’s be honest. Once you start ‘just looking’, it doesn’t take long to find a home that seems to fit!
“Are you wondering what kind of down payment you should be considering?” I asked. They both nodded happily.
“I know we have to put 20% down, but we’re wondering if we should do more and also how long it will take us to save for it.” Christine added.
If this sounds like you, you’re not alone. Many people think they automatically need a 20% down payment.
It’s by far the most common question I get asked when my clients and I are plan out their next few years after residency.
I smiled. “Would you be surprised to hear you may want to consider having less than a 20% down payment?” I asked.
They both stopped their frantic scribbling and looked at me.
Don’t Let A Down Payment Stop You From Buying A Home
Stuart’s eyebrows were in the air.
“But if we don’t have the 20% down payment, we’ll have to pay thousands more in mortgage default insurance like CMHC. That’s what our banker told us.”
“That’s true.” I said. “If you’re looking at an $800,000 property, but only have $80,000 available for a down payment, you might be looking at over $22,000 in fees to protect the mortgage.”
“Nobody wants to have to add $22,000 to their mortgage. But there are some other factors to consider.
a)The property could increase in price by that much or more, b) or worse, it sells quickly and you miss the property entirely because you want to put 20% down but don’t have it saved.
“Would you be surprised to hear you may want to consider having less than a 20% down payment?”
-Adrian George
In either situation, going with a lower down payment for now might be the better option.”
Stuart and Christine looked at each other and said, “We never thought of it that way before!”
I love it when clients say this to me.
“The trick is proper planning now so you can move quickly if needed. While we continue to save for your target down payment, we arm you with a pre-approved mortgage so you know how much of a home you’re shopping for with the approval tucked into your back pocket.” I added.
They both smiled, and Stuart popped open his phone.
“Hey Adrian – look at some of the houses we’ve been considering…” he said.
I really enjoy helping my clients achieve these major life goals (and often being invited to their housewarming parties!).
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