In order to obtain conventional mortgage, home buyers must put down at least 20% of the purchase price or appraised value as a down payment. If time or resources are not available to save the 20% , then you can choose a high-ratio mortgage to buy a home with a down payment of as little as 5%. This option called “high ratio mortgage” requires you to purchase default insurance.
The size of the down payment varies and depends on the type or mortgage. Down payments can range from 5% to 20% of the purchase price.
High -ratio or conventional mortgage prove for certain that the LARGER your down payment, the more you SAVE in the long run.
Visit the Canada Customs and Revenue Agency Publication for more information..
A larger down payment…
- Will Reduce your monthly principal amount and interest payment
- Will Reduce total amount of interest you pay over the life of your mortgage
RSP Home Buyers’ Plan
RSP Home Buyers’ Plan (HBP) allows the First-time home buyer to withdraw up to $25,000. from their RSPs for their home purchase.
That amount must be repaid within the 15 years, subject to a minimum annual repayment of 1/15 of the withdrawn amount. If the whole $25,000 is withdrawn, then the required minimum annual repayment is $1,333.
If less than the required minimum is repaid in any particular year then the balance is now added to the total income of that taxpayer.
Insuring Your High-Ratio Mortgage
Genworth Financial or CMHC can insure a mortgage for up to 95% of the lending value of the home. Purchasers, therefore do not need the large down payment.
Borrowers that are eligible include anyone who purchases a home in Canada that will occupy it as the principal residence. The availability of government-backed mortgage insurance is limited to the homes with a value of under $1 million.
Up to 39% of gross family income can be used for payments of mortgage principal and interest, heating and property taxes.
The buyer’s total debt (including consumer loans, etc.) cannot represent more than 44% of the gross family income.
People will pay a premium to insure a mortgage loan from CMHC or Genworth.
This premium is based on the down payment and the amount of the loan. The list of insurance premiums for mortgage are found here.
Paid up front or premiums can be added to the principal payment of the mortgage amount.
Amount of Loan:
Maximum allowed is 95% of lending value of the house.
Term of Mortgage:
This will be set by the lending institution.
House Price Max:
Determined and varies by the current market.