How much you need for a down payment - Canada.ca

What is a minimum down payment. A down payment is the amount of money you put towards the purchase of a home. Your lender deducts the down ... Skiptomaincontent Skipto"Aboutgovernment" Howmuchyouneedforadownpayment From:FinancialConsumerAgencyofCanada Onthispage Whatisaminimumdownpayment Whatismortgageloaninsurance Howthedownpaymentaffectsthetotalcostofyourmortgage Homebuyingprograms,plansandincentives Whatisaminimumdownpayment Adownpaymentistheamountofmoneyyouputtowardsthepurchaseofahome.Yourlenderdeductsthedownpaymentfromthepurchasepriceofyourhome.Yourmortgagecoverstherestofthepriceofthehome. Theminimumamountyouneedforyourdownpaymentdependsonthepurchasepriceofthehome. Ifyourdownpaymentislessthan20%ofthepriceofyourhome,youmustpurchasemortgageloaninsurance. Table1:Theminimumdownpaymentbasedonthepurchasepriceofyourhome Purchasepriceofyourhome Minimumamountofdownpayment $500,000orless 5%ofthepurchaseprice $500,000to$999,999 5%ofthefirst$500,000ofthepurchaseprice 10%fortheportionofthepurchasepriceabove$500,000 $1millionormore 20%ofthepurchaseprice Ifyou’reself-employedorhaveapoorcredithistory,yourlendermayrequirealargerdownpayment. Normally,theminimumdownpaymentmustcomefromyourownfunds.It’sbettertosaveforadownpaymentandminimizeyourdebts. Example:Howtocalculateyourminimumdownpayment Thecalculationoftheminimumdownpaymentdependsonthepurchasepriceofthehome. Ifthepurchasepriceofyourhomeis$500,000orless Supposethepurchasepriceofyourhomeis$400,000.Youneedaminimumdownpaymentof5%ofthepurchaseprice.Thepurchasepricemultipliedby5%isequalto$20,000. Ifthepurchasepriceofyourhomeismorethan$500,000 Supposethepurchasepriceofyourhomeis$600,000.Youcancalculateyourminimumdownpaymentbyadding2amounts.Thefirstamountis5%ofthefirst$500,000,whichisequalto$25,000.Thesecondamountis10%oftheremainingbalanceof$100,000,whichisequalto$10,000.Addbothamountstogetherwhichgivesyoutotalof$35,000. Whatismortgageloaninsurance Mortgageloaninsuranceprotectsthemortgagelenderincaseyoucan’tmakeyourmortgagepayments.Itdoesn’tprotectyou.Mortgageloaninsuranceisalsosometimescalledmortgagedefaultinsurance. Ifyourdownpaymentislessthan20%ofthepriceofyourhome,youmustbuymortgageloaninsurance. Yourlendermayrequirethatyougetmortgageloaninsurance,evenifyouhavea20%downpayment.That’susuallythecaseifyou’reself-employedorhaveapoorcredithistory. Mortgageloaninsuranceisn’tavailableif: thepurchasepriceofthehomeis$1millionormore theloandoesn’tmeetthemortgageinsurancecompany’sstandards Yourlendercoordinatesgettingmortgageloaninsuranceonyourbehalfifyouneedit. Costofmortgageloaninsurance Thefeeyoupayformortgageloaninsuranceiscalledapremium.Mortgageloaninsurancepremiumsrangefrom0.6%to4.50%oftheamountofyourmortgage.Yourpremiumdependsontheamountofyourdownpayment.Thebiggeryourdownpayment,thelessyoupayinmortgageloaninsurancepremiums. Findpremiumsbasedontheamountofyourmortgage: CanadaMortgageandHousingCorporation(CMHC) Sagen CanadaGuarantyMortgageInsuranceCompany Youcanpayyourpremiumbyaddingittoyourmortgageorwithalumpsumupfront.Ifyouaddyourpremiumtoyourmortgage,youpayinterestonyourpremium.Theinterestrateisthesamerateasyou’repayingforyourmortgage. Ontario,ManitobaandQuebecapplyprovincialsalestaxtomortgageloaninsurancepremiums.Yourlendercan’taddtheprovincialtaxonpremiumstoyourmortgage.Youmustpaythistaxwhenyougetyourmortgage. Howthedownpaymentaffectsthetotalcostofyourmortgage Saveasmuchasyoucanforyourdownpayment.Thebiggerthedownpayment,thesmallerthemortgage,whichcansaveyouthousandsofdollarsininterestcharges. Example:Howthesizeofadownpaymentaffectsthecostofamortgage Supposeyoubuyahomethatcosts$400,000. Assumethefollowing: interestrateis4% amortizationperiodis25years paymentfrequencyismonthly mortgageloaninsurancepremiumsareaddedtothemortgage Table2:Effectofthesizeofadownpaymentonthetotalcostofamortgage Downpayment Downpaymentamount Mortgage Mortgageloaninsurancepremium Mortgage (includesinsurancepremium) Totalcostofyourhome  (includesallcolumns) 5% $20,000 $380,000 $15,200 $395,200 $643,649 10% $40,000 $360,000 $11,160 $371,160 $625,712 20% $80,000 $320,000 Notrequired $320,000 $584,979 Homebuyingprograms,plansandincentives Beforeyoubuyahome,considertheprograms,plansandincentivesavailabletoyou. HomeBuyers’Plan(HBP) Tohelpyoucomeupwithadownpayment,youmaybeeligiblefortheHBP.TheHBPallowsyoutowithdrawupto$35,000,tax-free,fromyourRegisteredRetirementSavingsPlan(RRSP).Youmustusethisamounttobuyorbuildaqualifyinghome.Youhaveupto15yearstorepaytheamountsyouwithdraw. BeforeyousignupfortheHBP,consider: ifyoucanmaketherepayments ifwithdrawingfundsimpactsyourretirementsavings. Keepinmind: notmakingtherepaymentscouldendupcostingyoualotofmoneyinincometax youmayloseoutonanygrowthinyourRRSPwhilethefundsarewithdrawn. Findoutifyou’reeligibleandhowtoparticipateintheHBP. First-TimeHomeBuyerIncentive First-timehomebuyersmaybeeligibleforasharedequitymortgagewiththeGovernmentofCanada.Withasharedequitymortgage,thegovernmentoffersyoufinancingwithoutinterest.Thishelpsreduceyourmonthlymortgagepaymentwithoutincreasingyourdownpayment. ThroughtheFirst-TimeHomeBuyerIncentive,theGovernmentofCanadaofferstoafirst-timehomebuyer: 5%ofthepurchasepriceofanexistinghome 5%or10%ofthepurchasepriceofanewlyconstructedhome Youneedtorepaytheincentiveafter25years,orwhenyouselltheproperty.Youcanalsorepayitatanytimewithoutaprepaymentpenalty. Theproperty’sfairmarketvalueatthetimeofrepaymentwilldeterminetherepaymentamount. Findoutifyou’reeligiblefortheFirst-TimeHomeBuyerIncentive. RelatedLinks Choosethemortgagethatisrightforyou Buyingahome MortgageQualifierTool Didyoufindwhatyouwerelookingfor? Yes No Ifnot,telluswhy: Whatwaswrong? Ican'tfindtheinformation Theinformationishardtounderstand Therewasanerrororsomethingdidn'twork Otherreason Pleaseprovidemoredetails Youwillnotreceiveareply.Telephonenumbersandemailaddresseswillberemoved. Maximum300characters Submit Thankyouforyourfeedback Datemodified: 2021-06-28