The Down Payment | Costs when Buying a Home
When you purchase a new vehicle you usually put some money down to lower your monthly payment. Buying a home works essentially the same way. You don’t want to leave yourself house-poor so work out a down payment that leaves you comfortable. If you are able to make a larger down payment, this means that you’ll have to borrow less. When you get a mortgage for the home, the amount of down payment you apply to the purchase price is expressed as a percentage. In Canada, the minimum amount of down payment is 5%, but most first-time home buyers put between 5-20% down. It is important to know that if you put down less than 20% of the purchase Price as a down payment, you will also need Mortgage Loan Insurance (CMHC).
See my article “Costs when Buying a Home? Mortgage Loan Insurance“. The amount of this insurance is a calculated on the percentage of the down payment to purchase price. As of July 2014, the cost of this insurance will be increasing by 15%. Approximate Cost: Minimum 5% of Purchase Price One-time Cost