how much do you need for a down payment and your mortgage options

One of the first things you’ll need to consider when buying a home is how much you need for a down payment. How much you put down can impact your mortgage. Here are a couple of things to consider before you start shopping for your new home.


  1. Your down payment is how much you are paying up front for your house.
  2. The bigger the down payment, the less you actually end up borrowing.
  3. If 20% is too much to put down, you can get a high-ratio mortgage with a down payment as little as 5%.
  4. If you are buying your first home, you can temporarily borrow money from your RRSP for a down payment.

Let’s jump into it, shall we?


What is a down payment?

A 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 25% (or more!) of the purchase price. The amount of your down payment dictates the type of mortgage you get, such as conventional or a high-ratio mortgage (sometimes referred to as CMHC). So, in the end, how much you need for a down payment depends on the price of the house and which mortgage type you choose.


Conventional mortgage

With a conventional mortgage, you are required to out at least 20% down on the purchase price of the home or the appraised value, whichever is less.


By making a 20% down payment on your home, you can expect lower overall mortgage payments. Because of that, you will pay less interest when all is said and done. The key is equity and, with more money down, you have greater equity to work with. Another benefit of a conventional mortgage is that you are often not required to purchase mortgage insurance (although you may still want to).


High-ratio mortgage

With a high-ratio mortgage, your down payment can be as low as 5%. With this option, you will have to pay a premium through one of our partnerships (Canada Mortgage and Housing Corporation, better known as CMHC, or Genworth Financial). We work this cost into your mortgage payment to keep things simple for you.


Home buyers’ plan

One last option 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. You will need to meet certain conditions, like repaying the money within a period of no more than 15 years. Under this plan you can withdraw up to $35,000* (or $70,000 per couple) tax-free from your RRSP savings and apply it towards a down payment on your home.

*Budget 2019 proposes to increase the Home Buyers’ Plan withdrawal limit to $35,000. See approval updates on the Government of Canada website here.

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