As a mortgage agent, one of my favourite things to do is assist first time home buyers.
There is something extra special about purchasing your very first home.
I also understand that starting the process can be a little intimidating and not always so exciting. I do my very best to make the process as educating and easy as possible on all of my clients. For now, let's talk about down payment.
What is a mortgage down payment?
Since most Canadians cannot afford to buy a home up front in cash, banks will lend you the money to purchase. However, they expect you to have some money up front to put towards the purchase. A mortgage down payment is money that you put towards the purchase price of your home.
What is the lowest possible down payment?
In Ontario many lenders allow you to put as little as 5% of the purchase price as down payment. It is government mandated that when a borrower puts less than 20% down payment that they must have an insured mortgage.
Example:
New Home Purchase Price: $500,000
Minimum Down Payment Required: $25,000
If you purchase a home over $500,000 more than 5% is required.
Less than $500,000 purchase price = minimum 5% down payment
$500,000 - $999,000 purchase price = minimum 5% down payment on the first $500,000 and min 10% down payment on the rest
$1,000,000 + purchase price = minimum 20% down payment
What is an insured mortgage?
An insured mortgage is any mortgage in Canada that has less than 20% down payment.
It is government mandated that the applicant has mortgage default insurance.
Mortgage default insurance protects the lender in case you stop making payments on your mortgage/default. Having this insurance provides less risk to the lender and our overall financial system and allows buyers to purchase with less down payment.
How do I get mortgage default insurance?
When you submit a mortgage application with less than 20% down payment your lender will automatically apply for default insurance and add the insurance cost to your new mortgage amount. The cost of the insurance varies depending on the mortgage amount and how much down payment you have.
Have more questions about down payment or a mortgage pre-approval?
The best way to get answers is to set a video or phone meeting with Tess. She will happily answer any questions you have and assist you throughout the mortgage process.