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 The withdrawn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annual repayment that is 1/15 of the amount withdrawn.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the full $20,000 is withdrawn, the minimum annual repayment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.
Insuring Your High-Ratio Mortgage
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.
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