How Much Do You Need for a Down Payment in Canada?

How Much Do You Need for a Down Payment in Canada?

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    Published 17/07/2020 13:07 EST

    Saving for the down payment on your first home requires diligence and patience, but it’s well worth the effort as taking the plunge into homeownership is both rewarding and financially satisfying when you begin building equity and wealth in your own property. 

    There are numerous down payment options available today to help get you into a home sooner. See: Your Down Payment Options When Purchasing a House

    Key Takeaways
    • The minimum down payment is 5% of the purchase price for a home valued at $500,000 or less and 10% for the portion of the purchase price above $500,000
    • There are numerous down payment options available today to help get you into a home sooner – both traditional and non-traditional sources
    • The smaller your mortgage and the lower amount of interest you’ll pay over your time as a mortgage holder, the quicker you can build home equity

    Minimum down payment

    The minimum down payment when buying a home in Canada is 5% of the purchase price for a home valued at $500,000 or less and 10% for the portion of the purchase price above $500,000.

    🧐 Example

    If you’re buying a home for $750,000, your minimum down payment is $25,000 for the first $500,000 (5%) and $25,000 for the remaining $250,000 (10%) = $50,000 minimum down payment

    How does the down payment amount affect the total cost of a mortgage?

    If you can make a larger down payment than the minimum requirement, your mortgage payments will be lower and it will take you less time to pay off your mortgage. The smaller your mortgage and the lower amount of interest you’ll pay over your time as a mortgage holder, the quicker you can build home equity.

    Down payment sources are broken down into two categories: traditional; and non-traditional. There are many choices available today to help you turn your homeownership dreams into reality. See: Your Down Payment Options When Purchasing a House

    Home Buyers’ Plan (HBP)

    One popular down payment source includes borrowing from your registered retirement savings plans (RRSPs). Under the Home Buyers’ Plan (HBP), first-time homebuyers can withdraw up to $35,000 from their RRSPs ($70,000 as a couple) for a down payment. This is a tax-free, interest-free loan, where funds must be repaid over 15 years (annual payments of one 15th of the total amount are required). Another stipulation is that the funds must be in the RRSP account for a minimum of 90 days prior to being withdrawn for HBP use. See: Use the Home Buyers’ Plan to Buy Your Home Sooner

    👆 Tip

    Under the Home Buyers’ Plan, first-time homebuyers can withdraw up to $35,000 from their RRSPs ($70,000 as a couple) tax- and interest-free for a down payment

    First-Time Home Buyer Incentive (FTHBI)

    The First-Time Home Buyer Incentive (FTHBI) is designed to help ease mortgage costs for first-time homebuyers by reducing monthly payments through shared-equity loans – up to 5% toward the down payment of a resale home and as much as 10% for newly-built homes. The idea is that, by increasing the size of your down payment, the FTHBI reduces monthly mortgage costs, making homeownership more affordable. See: Buying your first home? The First-Time Home Buyer Incentive may give you a needed boost!

    👆 Tip

    By increasing the size of your down payment, the First-Time Home Buyer Incentive reduces monthly mortgage costs, making homeownership more affordable

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