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Down payment assistance through co-ownership

A close friend of mine is part of a company here in Toronto called Ourboro. They are a home financing company that offer up to $250,000 toward down payments on homes. In exchange for this, they take a stake in the home and their pro-rata share of any future appreciation. So they are really co-owners. And they make their money on the gains. The maximum hold period is 10 years, but the principal owner is free to buy out Ourboro and stay in the home if they want.

It’s an interesting model (and I have written about analogous ones before on the blog). Because in expensive housing markets like Toronto, saving up enough of a down payment is usually the biggest barrier to homeownership. But the question that I continually ask my friend is this: Does a model like this actually end up hurting overall affordability by increasing people’s buying power? Similar to what happens when interest rates go down. People can now afford more home.

Perhaps. But Ourboro’s roots are in social enterprise and their focus is on helping people who might not otherwise be able to buy a place. They also see their approach as addressing the “fundamental imbalance of housing supply and demand in Canada.” We know that more supply would help with affordability, but so does this I guess. And it’s easier to implement.

I suppose another way to look at this model is that it’s allowing individual homeowners to bring on co-investors, which is, of course, normal practice in the world of commercial real estate and development. Most developers don’t have all the equity needed to finance their own projects. They raise it from outside investors (and prosper through the magic of carried interest). Now end-users can do that too (but sorry, no carried interest per se).

So if you’re in the market for a new home in the Greater Toronto Area and are looking for a little help with the down payment, Ourboro might be an option for you to consider.

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