When buying property, the amount that you decide for your down payment depends upon your specific financial situation. Generally, the more you put down, the lower your monthly payments will be.
However, it is also important to consider the kind of mortgage you are willing to take on, according to Ray Ferris, president of the Ontario Real Estate Association.
“It really comes down to what you can afford, but also your comfort level,” Ferris explains. “Are you prepared to take on a conventional mortgage, or is a high-ratio mortgage more realistic? That’s something you’ll need to work out.”
Here is the difference:
Conventional mortgage: your down payment is 20 per cent of the purchase price or more.
High-ratio mortgage: your down payment is less than 20 per cent of the purchase price.
As of February 15, 2016, the minimum down payment for a new mortgage has been modified. The new requirements are as follows:
• For homes with a purchase price less than or equal to $500,000, the minimum down payment is 5 per cent;
• For homes with a purchase price greater than $500,000 and less than $1 million, the minimum down payment is 5 per cent of the first $500,000, plus 10 per cent of the remaining balance;
• For homes with a purchase price of $1 million or more, the minimum down payment is 20 per cent.
“High ratio mortgages must be insured by a mortgage insurer, and you will be required to pay the premium for this insurance,” adds Ferris. “Your Realtor will be familiar with all of these rules, so be sure to discuss with them.”
More information is available at www.wedothehomework.ca.