The size of a down payment can vary. Depending on the type of mortgage, down payments generally range from 5% to 20% of the purchase price. To obtain a conventional mortgage, home buyers are required to put down at least 20% of the purchase price or appraised value (whichever is less) as a down payment. If you don’t have the necessary time or resources to save a full 20% down payment, you can choose a high-ratio mortgage and buy a home with a down payment of as little as 5%. This option is called a high-ratio mortgage and it requires you to purchase default insurance.

Whether you choose a conventional or a high-ratio mortgage, one thing is almost always certain: the larger your down payment, the more you save in the long run.

Want more information? Visit the Canada Customs and Revenue Agency Publication.

A larger down payment…

• Reduces the amount of your monthly principal and interest payment
• Reduces the total amount of interest you pay over the life of your mortgage

Ask about the RSP Home Buyers’ Plan

The RSP Home Buyers’ Plan (HBP) lets a first-time buyer withdraw up to $25,000from RSPs for a home purchase. The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment that is 1/15 of the amount withdrawn. If the full $25,000 is withdrawn, the minimum annual repayment is$1,333. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer’s income.

Insuring Your High-Ratio Mortgage

CMHC or Genworth Financial may insure a mortgage for up to 95% of the lending value of the house. Therefore, purchasers do not need a large down payment. Eligible borrowers include anyone who buys a home in Canada intending to occupy it as their principal residence. And the availability of government-backed mortgage insurance is restricted to homes with a value of $1 million or less. Purchasers can use up to 39% of their gross family income for payments of mortgage principal and interest, property taxes and heating.               A buyer’s total debt load (including consumer loans, etc.) cannot exceed 44% of the gross family income.

People who insure a mortgage loan with CMHC or Genworth pay a Premium. The Premium is based on the down payment and loan amount.

Cost – Premiums can be paid up front or added to the principal amount of the mortgage.

Loan Amount – Up to 95% of the lending value of the house.

Mortgage Term – To be set by the lending institution.

Maximum House Price – Varies by market.

Want more information? Visit the Canada Mortgage and Housing Corporation or Genworth Financial websites.