the down low on the down payment
One of the first things you’ll need to consider when buying a home is how much your down payment will be. Your down payment can impact your mortgage so here are a couple things to consider before you start shopping for your new home. The down payment is how much money you have set aside to put towards the purchase of your home. This is paid upfront and can range anywhere from 5% to 20% or more of the purchase price. The amount of your down payment can also dictate the type of mortgage you get. For example, if you have 20% or more as a down payment, you will have a conventional mortgage, where as if you have less than 20% for a down payment, you’ll have a CMHC or an insured mortgage.
As you probably guessed, the bigger the down payment the less you actually end up borrowing for the principal amount of your mortgage. That means you will end up paying less interest in the end and you actually reduce the amount of your monthly mortgage payment.
Home buyers’ plan
One other down payment option to consider is the Government of Canada’s Home Buyers’ Plan. This federal government program allows you to borrow money from your RRSP (registered retirement savings plan) to buy your home, as long as you meet certain conditions like repaying it within a period of no more than 15 years. Under this plan you can withdraw up to $25,000 (or $50,000 per couple) tax-free from your RRSP savings and apply it towards a down payment on your home.
Generally speaking, the amount of your down payment is ultimately going to depend on your individual situation. Our associates will work with you to help put a savings plan in place so you can save for your down payment, no matter what size.