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How Much of a Down Payment Do I need?

October 12, 2016 - Updated: October 12, 2016

Ever wondered how much of a Down Payment you need?

Image result for Down Payment Photo

The amount of your down payment will determine whether you'll have a conventional mortgage or a high-ratio mortgage, which must be insured.

What's the difference?

  • Conventional mortgage: means your down payment is 20% of the purchase price or more.
  • High-ratio mortgage: means your down payment is less than 20% of the purchase price.

Effective back on February 15, 2016, the minimum down payment for new mortgages had been modified. The new breakdown is as follows:

  • For homes with a purchase price less than or equal to $500,000 the minimum down payment is 5%
  • For homes with a purchase price greater than $500,000 and less than $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the remaining balance
  • For homes with a purchase price of $1 million or more, the minimum down payment is 20%

High ratio mortgages must be insured by a mortgage insurer such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada or Canada Guaranty. You will be required to pay the premium for this insurance.

The insurance premium:

  • Will depend on the amount you are borrowing and the percentage of your down payment. Usually, mortgage default insurance premiums range between 0.5% and 3.6% of the purchase price
  • Can be paid at the time of purchase, or added to the principal amount of your mortgage. The insurance premium may be subject to provincial sales tax, which cannot be added to mortgage amount.

We would be more than happy to discuss this with you or you can visit us at Durham Bungalows.ca


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