Greater Savings with a Larger Down Payment

by | Aug 5, 2020 | Buying Property in Vaughan

House For Sale In Vaughan

Greater Savings with a Larger Down Payment

Depending on the type of mortgage and down payments, the size of the down payment can vary, where mortgage and down payments usually range from 5% to 20% of the purchase price.

Home purchasers are required to put down at least 20% of the buying price or appraised value; whichever is less; as a down payment, to obtain a conventional mortgage. You can select a high-ratio mortgage and buy a home with a down payment of as little as 0%, if you don’t have the required time or resources to save a full 20% down payment. This option is known as a high-ratio mortgage and it requires you to purchase CMHC insurance.

You will save more on a larger down payment, in the long run, is one thing which is almost always certain, whether you choose a conventional or a high-ratio mortgage.

To know more, please visit Canada Customs and Revenue Agency Publication.

Larger down payments for buildings:

Decreases the amount of your monthly principal and interest payment
Decreases the total amount of interest you pay over the life of your mortgage
homebuyers plan

Ask about the RSP Home Buyers’ Plan

For a home purchase, the RSP Home Buyers’ Plan (HBP) allows a first-time buyer to withdraw up to $20,000 from RSPs. Repayment of the withdrawn amount must be done within 15 years, subject to a minimum annual refund that is 1/15 of the amount withdrawn. The minimum annual repayment is $1,333, if the full $20,000 is withdrawn. If you repay less than the minimum in any particular year then the balance is added to the taxpayer’s income.

Insuring Your High-Ratio Mortgage

Purchasers do not need a down payment as CMHC or Genworth Financial may insure a mortgage for up to 100% of the lending value of the home. Suitable borrowers include anyone who buys a home in Canada intending to occupy it as their principal residence.

Anyone who insures a mortgage loan with CMHC or GEMICO pays a premium. The premium depends upon the down payment and loan amount for condos. Get a list of the mortgage insurance premiums here.