When buying a house, buyers often ask us a question, “what is the minimum down payment required for a mortgage”? The answer to this question depends upon property value. The minimum down payment required is 5% for mortgages under $500,000, 10% for mortgages between $500,000 & $999,999, and 20% down payment for purchase price of $1,000,000 or more. However, it is always beneficial to make a higher down payment as the principal on the mortgage goes down and the borrower ends up paying less interest over the life of the mortgage. The down payment 20% or more also eliminates the need to pay mortgage insurance premium. In this blog, we would discuss the most frequently asked questions regarding down payment and explain how you can save money for a down payment.
If you are looking to buy a house and curious how much down payment you must have in your bank account, you are at the right spot to gain knowledge about it. The down payment depends on the purchase price of the house.
Let us say you are interested to purchase a house of value at $800,000. What would be the down payment? For the first $500,000, down payment would be $25,000 ($500,000*5%) and $30,000 ($300,000*10%) on the remaining $300,000. In total, you should have $55,000 ($25,000+$30,000= $55,000) to buy a house of $800,000. In this case, the required amount for the down payment must be minimum $55,000. It is up to the discretion of the borrower if they want to make a higher down payment than the required amount.
Furthermore, if you pay less than 20% down payment, you are subject to purchasing a Default insurance. CMHC, Genworth and Canada Guaranty are the most responsible insurers if you are looking to insure your high ratio mortgage from Traditional lenders. This insurance protects the lenders if you stop making monthly payments. If you have any doubt regarding down payment and PMI, call Mortgage Brokers Toronto today to discuss your queries.
Tips to save down payment-
• A first-time home buyer may use RRSP savings up to $35,000 to make a down payment.
• A first-time homebuyer may be eligible for First time home buyer incentive from the government. Also, the government plays a crucial role in helping the new home buyer to buy a house. It is a shared-equity mortgage with the government of Canada. Ask a Mortgage Professional for details.
• Gifts from family in the form of down payment money will be accepted by most of the lenders. A donor is usually required to provide a gift letter to confirm that the money is a proper gift and not a loan. Also, The gift letter must be issued by the resident of Canada.
• The First-time homebuyers can use their Tax-free saving account (TFSA) to save money for down payment. As in this account, money grows without tax; you can withdraw money from your TFSA account tax-free.
• If you want to save money for a Down payment, pay off the line of credits / credit cards first. For more information, call MB Mortgages to check your eligibility to secure a mortgage.
Why choose us-
As a leading Mortgage Brokerage, we have strong relations with multiple banks and numerous lenders. We work with Canada’s leading lenders to provide you a mortgage solution that fits your budget. Our mortgage and financing process is amazingly simple, we represent you and match you with the best suited mortgage as per your needs. This way we can guide you through this complicated process with our years of mortgage financing experience.
• We are dedicated and professional Accredited Mortgage Brokers in GTA.
• We are well trained and have experience in the mortgage financing field more than 10 years.
• We can shop around with different lenders to get you the best possible mortgage rates and conditions as well.
• We have different options for different income and credit level with access to number of private lenders to suit borrower’s needs.
We are a professional mortgage broker in GTA. We can help you secure a mortgage with best mortgage interest rates. We are located at 2 County Court Blvd., Suite # 438, Brampton, ON L6W 3W8. Call MB Mortgages Inc. today at 905-458-6929/416-939-7131 for your queries or you can email us at: [email protected] or you can visit our website at www.mbmortgages.ca
The information provided in this blog post is intended to provide general information. You should consult with a mortgage professional to fully determine the scope of your situation. MB Mortgages shall not be held liable from usage of the information provided on this page. Individual situation may vary.