Greater Saving with a Larger Down Payment
The size of a down payment can vary. Depending on the type of mortgage, down payments generally range from 5%
to 25%
of the purchase price.
To obtain a conventional mortgage
, home buyers are required to put down at least 25%
of the purchase price or appraised value (whichever is less) as a down payment. If you don't have the necessary time or resources to save a full 25%
down payment, you can choose a high-ratio mortgage and buy a home with a down payment of as little as 5%
. This option is called a high-ratio mortgage and it requires you to purchase default insurance.
Whether you choose a conventional or a high-ratio mortgage, one thing is almost always certain: the larger your down payment, the more you save in the long run. A larger down payment --
- Reduces the amount of your monthly principal and interest payment
- Reduces the total amount of interest you pay over the life of your mortgage
Ask about the RSP Home Buyers' Plan
The RSP Home Buyers' Plan (HBP) lets a first-time buyer withdraw up to $20,000
from RSPs for a home purchase. The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment that is 1/15 of the amount withdrawn. If the full $20,000
is withdrawn, the minimum annual repayment is $1,333
. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer's income.
Want more information? Check the Canada Customs and Revenue Agency Publication
.
CMHC or GEMICO may insure a mortgage for up to 95%
of the lending value of the house. Therefore, purchasers only need a 5%
down payment. Eligible borrowers include anyone who buys a home in Canada intending to occupy it as their principal residence.
Purchasers can use up to 32%
of their gross family income for payments of mortgage principal and interest, property taxes and heating. A buyer's total debt load (including consumer loans, etc.) cannot exceed 40%
of the gross family income.
People who insure a mortgage loan with CMHC or GEMICO pay an application fee and a premium. The application fee ($75
- $235
) covers the costs incurred by the insurer to review the application. The premium is based on the down payment and loan amount. Typical fees range from 1.00%
to 3.25%
of the principal amount of your mortgage.
Cost:
|
Premiums range from 1.00%
to 3.25%
of the mortgage loan amount and can be paid up front or added to the principal amount of the mortgage.
|
Loan Amount:
|
Up to 95%
of the lending value of the house.
|
Mortgage Term:
|
To be set by the lending institution.
|
Max. House Price:
|
Varies by market.
|
