Ourboro: A Review

Given how high housing prices are in Canada right now, coming up with a decent down payment amount can be very difficult. Based on the current national average home price of $696,179, a 5% minimum down payment would be $34,808. And if you want to avoid mortgage default insurance, you’d need at least 20% down, or $139,235.

That’s a tall order for many Canadians. Luckily, there’s help available. Services like Ourboro are investing in real estate with homebuyer hopefuls to help them enter the housing market. Let’s take a closer look at what Ourboro is, how it works, and whether it’s worth it to allow the company to invest in your home purchase. 

What Is Ourboro?

Founded in 2019, Ourboro is a Canadian fintech firm that helps homebuyers get into the housing market by contributing to the down payment. Ourboro manages a pool of investment funds for investors who share ownership of the homes they invest in with buyers. 

In exchange for the down payment contribution made, Ourboro and its private fund own a share in the property’s equity. So, they make money through appreciation in the homes they invest in.

Who Can Use Ourboro? 

The following criteria must be met to qualify for Ourboro’s services:

• You must invest a minimum 5% down payment on your own 
• The home you’re buying must be your principal residence
• You must be a Canadian citizen or permanent resident 
• You must get pre-approved for a loan by one of Ourboro’s lending partners
• The home you’re buying must be located in one of the following areas:
  • Greater Toronto Area (GTA)
  • Hamilton
  • Guelph
  • Kitchener-Waterloo
  • London
  • Ottawa 

How Does Ourboro Help Canadians Buy A Home?

Ourboro helps you reach your 20% down payment by contributing up to a maximum of $250,000. In exchange for this contribution, Ourboro stakes a claim on the home’s value. When the home sells, the proceeds are divided accordingly based on Ourboro’s equity share.

Ourboro’s ownership shares in the property are based on the initial down payment contributions. You can contribute anywhere between 5% to 15% of the property’s value when you use Ourboro’s services, and Ourboro will contribute the rest to achieve a 20% total down payment.  

To illustrate how Ourboro’s co-ownership model works, let’s use an example:

In terms of the down payment itself: 

• Ourboro’s contribution works out to be 65% of the down payment ($110,500 ÷ $170,000). 
• Your contribution would be 35% of the down payment ($59,500 ÷ $170,000). 

So, when you eventually sell the home, Ourboro would take 65% of the property’s value, and you keep the rest.

How The Proceeds Are Split Upon A Home Sale 

Once you sell the home, the following events would occur:

• Outstanding debts are repaid. Firstly, if there are any outstanding balances to be paid to lenders and third parties, these debts must first be paid off using the proceeds of the sale. 
• You receive the total principal payments made. The total principal payments you made during the loan term are returned to you, less any closing costs at the time of closing. 
• Remaining proceeds are divided. If there are any proceeds remaining after all debts have been paid, they are split accordingly. 

Using the example above, let’s say you sell the home for a million after paying off $100,000 of your $630,000 mortgage, With an equity split of 35:65 with Ourboro, how much would you get when you sell? 

If you sell the house for $1,000,000, you’d have net appreciation of $370,000. Of this amount, Ourboro would get 65% and you’d receive 35%.

What Happens If The Home Depreciates In Value? 

Ideally, your home will increase in value over time, which is typical in a real estate market over the long haul. However, there are times when property values may dip. If you happen to sell your home for a lower price than what you paid for it, both you and Ourboro will share the loss.

In the case of home depreciation, the steps involved in distributing the proceeds of the sale would be the same as if you had sold after seeing an appreciation in your home’s value. Namely, all lenders and third parties would be paid off first, closing costs would be covered, and as much of your loan principal payments as possible would be returned to you. Lastly, if any sale proceeds are left, you and Ourboro will divide them accordingly based on the original equity split.

What If You Don’t Sell Your Home Or Want To Pass It Down To Your Kids? 

With Ourboro, you will enter a 30-year co-ownership agreement. That means you must sell your home within 30 years or less. 

If the 30-year term is approaching and you don’t want to sell the home, you have the option to buy out Ourboro’s share, if you have the finances to do so.

Ideally, you should be willing to sell your home within 10 years of buying a home in partnership with Ourboro. A shorter term allows you to minimize the amount of appreciation you would have to share with Ourboro, as your home will likely grow in equity as the years pass. The more equity you accrue, the more you’ll have to share with Ourboro. 

It should also be noted that you can sell your home at any point over the 30-year term. So, if you want to sell well before the term is up, you have the flexibility to do so. 

What Types Of Homes Can You Buy With Ourboro?

You can buy many of the same types of homes with Ourboro as you would if you were buying on your own:

• Single-family detached homes
• Semi-detached homes
• Townhouses
• Condos

However, certain types of properties cannot be purchased using Ourboro’s investments:

• Pre-construction homes
• Condos built before 1980
• Co-op housing
• Fixer-uppers that require extensive upgrades, like flooring, walls, and electrical, among others

What Happens If You Make Renovations To The Home?

Renovating and maintaining a home you buy as a co-owner with Ourboro may differ slightly from if you buy a home on your own: 

Renovations. If you want to conduct extensive renovations to your home, you’ll need to notify Ourboro of your intentions before beginning the project. However, if the renovation job is relatively minor, then you can make changes as you see fit without involving Ourboro. 

It should be noted that if you do perform renovations that increase the home’s value, you may qualify for a Renovation Credit, which allows you to get back some or all of the costs associated with renovating the home. 

Maintenance. When it comes to maintaining the home, you’re responsible for ensuring that all components remain in good condition. That said, it’s also in Ourboro’s best interests to make sure that the home stays in good shape, as they have a stake in the property’s value. As a way to protect their investment, Ourboro offers a free home maintenance service to help prevent issues from occurring and to ensure that everything is in good working order.  

Benefits Of Ourboro

There are a couple of major perks to using Ourboro’s services when buying a home:

• Get into the market sooner. If you don’t have enough money to come up with a sizable down payment on your own, you don’t have to wait years to save up. Instead, you can use what you have today and let Ourboro top you up to come up with what you need to finance a home purchase.
• Buy a higher-priced home. With the help of Ourboro’s contribution to a down payment, you may be able to qualify for a more expensive home in a more desirable area. This may be especially helpful if you need a bigger home to accommodate a growing family or other lifestyle needs. 
• Avoid CMHC fees. If you can’t come up with a 20% down payment, you’ll have to pay mortgage default insurance premiums, which can cost you a few thousand dollars. With Ourboro’s help, you can reach that 20% threshold and avoid these added fees. 

Drawbacks Of Ourboro

As helpful as Ourboro may be, there are a few downsides that are worth considering:

• Ourboro has equity in your home. The higher Ourboro’s share in the down payment, the more equity they’ll own in the home. When you sell, Ourboro could take a portion of the equity based on the amount they contributed to your down payment when you first bought the home.
• You’re responsible for maintenance and repairs. Even though you’re co-owners with Ourboro, any maintenance and repairs are your responsibility. 
• You can only keep your home for up to 30 years. When you enter an agreement with Ourboro, you agree to a 30-year term. That means you must either sell the home or buy Ourboro out by the time this term is up.
• You cover the closing costs. When you buy a home, closing costs can range anywhere from 1.5% to 4% of the purchase price, which can add up to thousands of dollars. Although Ourboro is a co-owner, you’ll be the one covering these extra costs.   

Other Down Payment Assistance Programs

If you need some financial assistance breaking into the housing market, there are other programs available to help:

Lotly

Similar to Ourboro, Lotly helps Canadians become homeowners by contributing down payment amounts. This online platform connects buyers with investors who will invest in homes in a co-ownership arrangement. You come up with 5% of the purchase price, and the investors you’re matched with contribute up to 15%, or $250,000, whichever is less.

Provincial Down Payment Assistance Programs

In addition to services like Ourboro and Lotly, other programs are available to beef up your down payment without sacrificing equity in your home. Many provinces offer down payment assistance programs to eligible residents. 

For instance, in Kitchener-Waterloo, Ontario, qualifying home buyers may be eligible for the Affordable Home Ownership, which provides a 5% loan for a down payment. In Montreal, Quebec, the Accès Condos program is available to eligible homebuyers. This program allows buyers to purchase a condo with a $1,000 deposit, and the Société d’Habitation et de Développement de Montréal (SHDM) will advance a certain percentage of the purchase price to be applied to the down payment.

Other provinces have similar programs to help residents come up with a down payment:

• Ontario (Simcoe County): Affordable Housing Program
• Alberta (Calgary): Attainable Homes Program
• BC: BC HOME Partnership Program
• Manitoba (Some Rural Areas): Affordable Homes Program 
• New Brunswick: Home Ownership Program
• Nova Scotia: Down Payment Assistance Program (DPAP) 
• PEI: Down Payment Assistance Program (DPAP)

Additional Reading

How Does A Gifted Down Payment In Canada Work?

Why Do Smaller Down Payments Qualify For Lower Mortgage Rates?

Home Deposit vs. Down Payment

Should You Use Ourboro?

If you can come up with 5% of the down payment on a home but can’t quite scrounge any more than that, then Ourboro may be able to help. While a 5% down payment may be the minimum down payment in Canada, many times it’s still not enough. In these cases, Ourboro can bridge the gap. Just keep in mind that you’ll be trading in a potentially sizable amount of equity in exchange for their services.

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