4 Down Payment Questions
Down payments can be a challenge to navigate, even for experienced homebuyers.
How much do you need to put down? Do current market conditions change anything for you? Even the most basic questions aren't always easy to answer.
Whether you're thinking of buying soon, or planning ahead for a purchase, now is a good time to clear up any uncertainties and come up with the right strategy.
Take a look at these faq's, and reach out if you need a helping hand.
How much should your down payment be?
The minimum down payment depends on the purchase price of the home:
- Less than $500,000, the minimum is 5%
- $500,001 - $999,999, is 5% of the first $500,000, and 10% on the rest
- Over $1,000,000 or more, the minimum is 20%
Is a larger down payment better?
It depends on your budget and goals. A big down payment will mean a smaller monthly payment and fewer interest costs in the long run. If it eats into your emergency savings, or puts you in dire financial straits though, it's probably not the best move.
What should you consider when setting your amount?
The size of your down payment influences three things:
- The home price you can afford
- The size of your mortgage and monthly payment
- The amount of CMHC insurance you pay
Talking with an experienced loan officer will help you get an accurate idea.
Do you have to come up with all of it on your own?
There are a number of ways you can find funds for a down payment:
Traditional sources include saving a fixed amount from every paycheque, selling stocks, bonds, or personal property, or reaching out to family.
Another great option is the RRSP Home Buyers' Plan (HBP) which allows first-time homebuyers to withdraw up to $35,000 from Registered Retirement Savings Plans (RRSPs) for a home purchase, tax-free.
Non-traditional sources include borrowed funds, and gifts from non-immediate family members.
And finally, the Canadian Government has a program where they contribute from 5% to 10% depending on the home you choose. It's called a Shared Equity Mortgage, and can go a long way to helping you with home ownership.
Need help finding your next home? Get in touch today.