Greater Savings with a Larger Down Payment
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 least20% 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 as5%. 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
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. A list of the mortgage insurance premiums can be found here. 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. Max. House Price: Varies by market. Want more information? Visit the Canada Mortgage and Housing Corporation or Genworth Financial websites. |