Most mortgages require a down payment of some amount of money. The amount of money that you are required to put down depends on your situation. Our mortgage brokers can quickly tell you what the current requirements are. Call us for a free consultation on your mortgage.
The minimum down payment depends on what the Bank of Canada requires for a mortgage. The minimum amount that you used to be able to put down for a mortgage was 5%. The challenge is that Canada Mortgage and Housing Corporation (CMHC) which insures these mortgages has changed its requirements. CMHC now will only insures mortgages below the 80% loan to value ratio. This means that most people will need to have a down payment of at least 20%.
The interest rate that you pay is highly dependent on the down payment. A borrower can get a reasonable with a 20% down payment. A down payment of 25% or more allows the borrower to get the lowest rate. It is usually in the best interest of the home owner to place the largest amount possible as a down payment.
It is possible to acquire a mortgage and put none of your personal money as a down payment. The home owner must have an excellent credit rating and a high income with a Notice of Assessment from Revenue Canada. The actual down payment could come from other property that is secured as collateral or from personal lines of credit. The chance of getting zero down mortgage is very low and we suggest you consult with our broker before you go this route.
Home Buyers Plan
The Canadian government’s Home Buyers Plan allows you to borrow up to $25,000.00 from your RRSP to use as a down payment on a mortgage. You must pay the borrowed amount back within 15 years. There are certain penalties if you do not make the payments on time.
Follow this link for the Bank of Canada.