The size of a down payment can vary. Depending on the type of mortgage, down payments generally range from zero per cent to twenty per cent of the purchase price.
Sun
To obtain a conventional mortgage, home buyers are required to put down at least 20 per cent 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 20 per cent down payment, you can choose a high-ratio mortgage and buy a home with no down payment. 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
interest you pay over the life of your mortgage
Speak to a mortgage specialist to show you how much you could save, and show you many more money-saving strategies.
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 The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment that is 1/15 of the amount withdrawn. If the full $20,000 is withdrawn, the minimum annual repayment is $1,333.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 Genworth may insure a mortgage for up to 100 per cent of the lending value of the house. Therefore, purchasers do not need a 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 per cent 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 per cent of the gross family income.
People who insure a mortgage loan with CMHC or Genworth pay a premium. The premium is based on the down payment and loan amount. Typical fees range from 1.00 per cent to 3.50 per cent of the principal amount of your mortgage.
© The Vancouver Sun 2008
