Mortgage down payments can be painful! Especially when you don’t have enough savings. Let’s take a look at how our mortgage experts can help you secure low rate mortgages with suitable down payments.
How to Approach Down Payment
We can understand mortgage down payment as the amount of money the borrowers pay upfront before they purchase a property. It is mentioned in percentage of the real estate value of house. Both first time home purchasers and those looking to move up will invariably find pooling up the money for making a down payment. This can really be an unnerving job. However, there are some good options for buyers to significantly ease the task as per their specific situation.
Your Options in Canadian Real Estate
In Canada, the minimum down payment is 5%. In a Home Buyers Report published recently, TD Canada Trust has revealed that about 30% of the homebuyers are either willing to have or already have not less than 20%. Notably, this is the point at which there is no need for any mortgage default insurance.
As a result of the new CMHC rulings, henceforth home prices more than $1 million will need a minimum down payment of 20%. The down payment size can affect three things including the home price that you can afford, the mortgage size and monthly instalments and the amount you need to pay for CMHC insurance.
There are a number of mortgage down payment options.
- Personal Savings: One of the proven ways you can source funds include saving a fixed amount from pay-cheques, trading stocks, personal property or bonds or seeking the help of immediate family.
- RRSP (Registered Retirement Savings Plans) – Home Buyer’s Plan (HBP) is another useful way for first-time home buyers. They can withdraw about $25,000 to meet the down payment to purchase a home. This program is undertaken by the Canadian government.
If you can meet certain conditions and qualify for this program, just go ahead with it. It has a great number of favourable aspects to benefit homebuyers. One great feature is its tax-free advantage. Considering this, many home-buyers set up RRSP accounts well in advance. This way, they take the benefits of the rewards upon maturity while purchasing a house.
- The other sources that you can think of include borrowings and gifts from family members. However, when the home buyers make use of such sources, they will have to bear the CMHC insurance surcharge of 0.15% for down payments of 5% or even lesser.
Various Other down Payment Options for Canadians
There are two other options that home buyers can consider. Homebuyers will require a High Ratio Mortgage when they need to borrow more than 80% of their home value. High ratio mortgages are protected either by CMHC. With higher mortgages, you can lower down payments to as low as 5% thereby, being able to ease the burden.
For those who have at least 20% down payment for home purchase, the conventional mortgage might be the right choice. We at Canada MGC work with a number of financing companies that provide standard conventional mortgage options for both new and existing homes. With such a number of mortgage down payment options, home buyers can choose the perfect mortgage deal.
CMGC professionals work exclusively on your mortgage application and suggest the most suitable down payment. Call today for customized mortgage solutions.