For the uninitiated, there are several schemes proposed by various promoters that will play on your dream of owning a home, even if you don't have the necessary downpayment. I have suggested in the past where and how to find the 5% (first time buyers only) downpayment, and I want to repeat it, but first the expose....

Some promoters will advertise a "rent-to-own" scheme whereby some or all of the rent will be applied toward the necessary downpayment. Let me assure you that if this were possible, all the new home builders would be hopping on the bandwagon. If your downpayment is less than 25% of the purchase price, then the promoter must mortgage through a lender that will insure the mortgage through Canada Mortgage and Housing Corporation (CMHC). Their guidelines are clear. They will allow a rent-to-own plan provided the applicant:

a) pays no less than market rent during their rental period,

b) receives no rebate or credit from the landlord that could be used towards his/her downpayment,

c) must prove that over and above his/her rent, he/she has accumulated money towards the downpayment.

Some promoters may try to sell you an option to buy under the guise of home ownership. An option can be bumped by another offer. Some promoters may insist on establishing the price of the unit only after you have accumulated your downpayment. The purchase price may not be to your satisfaction at that point in time. In the meantime, your rental payment has been wasted. On a true rent-to-own, if the promoter is willing to set the price of the unit today, and let you rent it while you accumulate your downpayment by CMHC guidelines, then jump at the deal.

Other promoters will guarantee home ownership today without the need of a downpayment. Some of these promoters may be selling you "equity participation". They will get you to buy the house they want to sell, and "marry you" with an investor who will provide the downpayment to CMHC guidelines. You don't own your unit outright. Some time in the next five years you must buy back the Investor's portion. Nine cases out of ten, you will have to sell the house to pay the debt. There may also be restrictions as to how you sell the home. After you have spent all this money to sell the unit to pay back the debt, there usually is little or no money left over for you. Equity participation works in a real estate boom, but it generally will not work when real estate is stagnant.

I still feel that real estate is where it's at, especially the need for real estate in proper retirement planning. You must start as soon as you can on the road to downpayment accumulation. You may use cash, bonds, G.I.C.s, R.R.S.P.s, you may even borrow your downpayment as long as the loan collateral was an asset. Your may receive a gift from a direct relative (mother, father, sister, brother) or an early inheritance. There are so many ways of getting the downpayment, why would you want to go to a scheme to find home ownership. Any plan that seems too good to be true, probably is TOO GOOD TO BE TRUE.