Quick Facts: Down Payment Requirements for Mortgages
Posted September 13th, 2016 at 7:55 pm by Aaron Nicklen | 0 Comments
Before you start saving to buy a home, it’s important to know how mortgage down payments work. By planning early, you’ll be in the best position when it comes time to purchasing your dream home.
Here are the basics. A mortgage down payment is the amount of upfront, liquid money you’ll need when buying your home. Typically, mortgage down payments are expressed as a percentage of the total value of the home price.
In Canada, there are two types of mortgages: conventional mortgages and high-ratio mortgages.
A conventional mortgage means you’re able to make a 20% down payment on the purchase price of your home or more. A high-ratio mortgage means your down payment is below the 20% threshold of the purchase price of your home. For high-ratio mortgages, you have to be insured by a mortgage insurer, such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada, or Canada Guaranty. If you go down this route, you’ll also have to pay the premium for the insurance, which usually ranges between 0.5% and 2.75% of the total mortgage amount.
As of February 15, 2016, the minimum down payment on your home depends on the purchase price of the house. Here’s the breakdown:
- If the purchase price of the home is less than or equal to $500,000, then the minimum down payment is 5%
- If the purchase price of the home is greater than $500,000 and less than $1 million, then the minimum down payment is 5% on the first $500,000 and 10% on the remaining balance
- If the purchase price of the home is greater than $1 million, then the minimum down payment is 20%
There’s quite a bit to know. Familiarizing yourself with the language now will make you a more confident, informed purchaser when it comes time to purchasing your home and securing a mortgage.