How much do you need for down payment?
Downpayment is the amount of money you put towards the purchase of a home. Deduct the downpayment from the purchase price. Mortgage loan covers the remaining fo the purchase price of the home.
Minimum downpayment you will need depends on the purchase price of the home you are buying.
Min Purchase price Min Amount of Downpayment
$500,000 or less 5% of purchase price
$500,000 – $999,999 5% of the first $500,000 &10% of over and above of purchase price
1 Mill & above 20% of the purchase price
If self employed, or with poor credit you may have to put larger downpayment.
How does size of downpayment affects your mortgage.
The bigger the downpayment the smaller is the mortgage which can save you thousands of dollars over the life of your mortgage.
Example: Assume the purchase price of home is $400,000, 4% Interest rate, Amortization taken 25 years, Monthly payments.
Effect of downpayment on total cost of mortgage.
DP DP Amt Mtg Loan Insurance Total Mtg Total Mtg Cost of Home
5% $20,000 $380,000 $15,200 $395,200 $643,649
10% $40,000 $360,000 $11,160 $371,160 $625,712
20% $80,000 $320,000 NA $320,000 $584,979
Home Buyers Plan(HBP).
You may be eligible for Home Buyers Plan that can help with the downpayment for the purchase of the home. The Home Buyers’ Plan allows you to withdraw up to $35,000, tax-free, from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home. You have up to 15 years to repay the amounts you withdrew.
It is critical that you consider if you are capable of making repayments and will it affect your retirement savings.
Find out your eligibility for Home Buyers Plan?
First Time Home Buyers Incentive. You are also eligible for First Time Home Buyers Incentive if you are buying home for the first time. shared equity mortgage with the Government of Canada.The shared equity mortgage program is where the government offers you financing without interest to help reduce your monthly mortgage payment without increasing your down payment.
Government of Canada offers home buyers 5% of the purchase price of existing home. 5% or 10% of the purchase price of newly constructed home.
The incentive received has can be repaid after 25 years, or when you sell the property. You can also repay it anytime without pre-payment penalty. The repayment is based on the Fair Market Value of the property at the time when repayment is made.
Find out your eligibility for First Time Home Buyer Incentive
If you a First Time Home Buyer and would like to purchase your first home. You need to give Sheema Kalra Team a call today. 416-878-1000.
