Down Payments

 

The down payment is an amount between 5 % and 20 % of the purchase price of the property to be purchased.

The down payment is essential for obtaining a mortgage loan. Depending on the value of the property, this amount can be quite important. In the case of a conventional purchase of $ 250,000 the required down payment is of $ 50,000 which is equivalent to 20 % of the estimated value of the property or the purchase price.

However, if you have not accumulated the sum of the equivalence of 20% of the value of the property, you will need to get mortgage loan insurance.This helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment of 5% — with interest rates comparable to those with a 20% down payment.

To obtain mortgage loan insurance, lenders pay an insurance premium. Typically, your lender will pass this cost on to you. The premium payable is based on a percentage of the home’s purchase price that is financed by a mortgage. The premium can be paid in a single lump sum or it can be added to your mortgage and included in your monthly payments.

Mortgage loan insurance is not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate.

 

There are different possibilities to raise the amount needed for the down payment. It can be in a traditional or non-traditional form.

 

Traditional sources can be:

RRSP withdrawal

Savings, including an inheritance

Proceeds from the sale of your property

Refinancment of a property

Non-repayable gift from immediate relative

Non-traditional sources : any source of funds provided there is no arm's length with the purchase or sale of the property :

Personal Loan

Repayable loan from relatives or friends ( other than parent, brother or sister) .

When getting your mortgage it is important to also plan an amount of 1.5 % of the value of the property to cover other costs that will be required , such as: legal fees , disbursements ( scoliares and municipal taxes etc.) .

 

Down payment         Insurance premium

  

        5  %                             3.60 %

       10 %                             2.40 %

       15 %                             1.80 %

       20 %                       conventional

Table showing the minimum down payment depending on the type of property occupying
 

Minimum down payment         Property

  

        10 %                              Triplex or quaduplex

        15 %                               Five or more units

Table showing the minimum down payment for non-occupant property
 

Minimum down payment            Property

 

     20-35 %                                 1 to 4 units

     15 %                                  5 units and more