Your Down Payment

A minimum cash down payment from your own resources is generally required because mortgage lenders are reluctant to advance the entire purchase price of a property. Your minimum down payment would normally be 5%, however, several lenders are willing to allow well qualified purchasers to borrow 100% of the purchase price of a home in return for a higher interest rate and a fixed borrowing term. As well, the Canadian Government currently has a program that allows first time buyers to use up to $20,000 (proposed to be increased to $25,000) from their RRSP to help with the purchase of their home. Nevertheless, it's to your advantage to maximize your down payment (20% or more would be ideal), so you will be able to reduce or even avoid paying the mortgage insurance premium. The larger your down payment, the easier it will be to arrange a mortgage and carry it comfortably. The smaller your loan, the lower your interest expense will be, and the more equity you will have in your home. Equity is equal to the value of your home minus the amount of your mortgage.

» Back to Mortgage Information

Look for the Colour Print Edition of Real Estate Update