When you plan to buy a house and apply for a mortgage, one of the first things you should consider is the down payment to acquire the mortgage. The higher the down payment, the easier it will be to get approved for a mortgage.

How Much Cash Will You Need?

The down payment for the mortgage can vary depending on the purchase price of the property and can range from 5% and up.

Here’s how you can calculate the necessary down payment:

  • If your purchase price is less than $500,000, the minimum down payment will be 5% of the purchase value.
  • If it is more than $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the amount above $500,000.
  • If the purchase price is more than $1 million, talk to your broker as lenders will have different sliding scales for their required down payments.

Home Buyers’ Plan (HBP)

HBP helps to cover a portion of the down payment to allow you to buy your future home sweet home. It allows you to withdraw up to $35,000 tax-free from your Registered Retirement Savings Plan (RRSP) with a 15-year repayment period.

First Time Home Buyer Incentive

For a first-time home buyer, the government of Canada is proud to offer the First-Time Home Buyer Incentive to lower your mortgage payments and make it easier for you to buy your home. With it, you can borrow up to 10% of the purchase price of the home and repay it in the next 25 years or when you sell the property.

Mortgage Insurance

With a down payment of less than 20%, your mortgage is considered high ratio and requires mortgage insurance. This typically lies anywhere between 0.6% to 4.50% depending on the amount of down payment you have saved up.

Purchases with down payments of 20% or more are considered conventional mortgages and do not require Mortgage Insurance. The purchase of properties over $1 Million, Rental Properties and Subprime mortgage require a minimum down payment of 20% as they are not eligible for mortgage insurance.  

Are you ready to buy your first home? Visit my website or contact me toll-free at 877-899-5046 to get all the information you need to start the process of buying your first home sweet home.