What is the minimum down payment to buy a house?
Property Purchase Price | Minimum Down Payment |
Up to $500,000 | 5% |
$500,001 to $999,999 | 5% of the first $500,000 + 10% for the amount over that |
$1,000,000 and above | 20% (may vary depending on purchase price, location and lender) |
Rental Property | 20% or more (may vary depending on purchase price) |
For down payments less than 20%, mortgage default insurance will be required. Commonly known as CMHC insurance.
There are three mortgage insurers in Canada. Canada Mortgage and Housing Corporation (CMHC), Sagen and Canada Guaranty.
Default insurance premiums are generally added on top of the mortgage amount. Some borrowers choose to pay it out of pocket.
Down Payment | Default Insurance |
5% | 4.00% |
10% | 3.10% |
15% | 2.80% |
20% | - |
Advantages of a Larger Down Payment:
Some benefits include
Lower mortgage payments: Putting a bigger down payment means borrowing a smaller mortgage, resulting in lower mortgage payments
Reduced interest costs: Smaller loan amount means you'll pay less interest over the life of your mortgage
Easier mortgage approval: Less income is needed for a smaller mortgage, the more equity in the home means lower risk
Strategies to Save for Your Down Payment:
Set Clear Goals: Determine the amount you'll need for your down payment based on your target home price. Set a savings goal and create a budget to help you reach it.
Automate Savings: Consider setting up automatic transfers to a dedicated savings account. This ensures that a portion of your income goes directly toward your down payment fund.
Reduce Unnecessary Expenses: Take a close look at your spending habits and identify areas where you can cut back. Redirect those funds into your down payment savings.
Additional Income: Explore ways to increase your income, such as taking on a part-time job or freelancing. Extra income can significantly accelerate your savings.
Gifts and Windfalls: If you receive gifts or unexpected windfalls, consider directing a portion of these funds into your down payment savings.
Assistance with down payment?
Are you a first time home buyer? If so, there are programs such as first home savings account, RRSP home buyer plan, incentives and rebates that can help
Gifted down payments from a close family member
Borrowed down payment is accepted by some lenders
Is your deposit part of your down payment?
Absolutely! When making an offer for a home, providing a deposit is customary and is considered a component of your overall down payment. For instance, if your total down payment is $50,000 and you've offered a deposit of $10,000, you'll be required to provide the remaining $40,000 at the time of signing.
When do you need to provide your down payment when purchasing a home?
At the time of your mortgage application, your down payment needs to be verified. However, you won't need to transfer the funds until your signing appointment with your lawyer to finalize the home purchase.
For ease of documentations, it is best not to move down payment funds around until your signing appointment.
No Down Payment Mortgages
Setting the record straight, there is no such thing as a $0 down payment mortgage or buying a house with no down payment.
Some of the mortgage options that make it appear like a no down payment mortgage would be borrowed down payment or equity take-out from an existing home. Some lenders have programs where borrowers can borrower the down payment as a loan, then use the funds as the down payment towards the purchase of a home. Borrowers who currently own a home with equity can also take equity out of the existing home to buy a new home. No down payment? No problem! Let's see if other options work for your scenario :)
Unsure of where to start? Let's connect for we can make a plan together!
Comments