Saving for a downpayment on your first home requires a lot of patience, discipline and routine. An extremely beneficial and crucial investment in yourself. Becoming a homeowner is satisfying financially when you start to build equity and wealth from your own property. Once you’ve become a homeowner, your future acquisitions or sales are more attainable and gives you greater options in today’s appreciating Housing Market.
How Much Downpayment Do You Actually Need In Canada?
In Canada the Minimum DownPayment required is 5% on the first <$500,000 and 10% for the remaining portion of the purchase price above >$500,000
Example
$1,000,000 Home; would require a $75,000 minimum down payment.
$25,000 (5% of first $500,000) and $50,000 (10% of the remaining $500,000)
Why Would You Pay More Than The Minimum DownPayment Amount?
Overall payments will be lower, better Interest Rates, and shorter amount of time to pay off the loan. Building home equity quicker. Also gives your situation more flexibility by freeing up more cash down the road, which you can use in other areas; like renovations, expansions, additional properties.
What Types Of Options/Support Are There For Homebuyers?
Home Buyers’ Plan
Or HBP is a popular source. In which potential homeowners can withdrawal up to $35,000 ($70,000 for couples) from their RRSPs towards a DownPayment for their property. This is a Tax-Free, Interest-Free Loan,
Stipulations/Conditions: Funds must be in RRSP account for a minimum of 90 days and 2 Loan must be paid over 15 years, with annual payments of 1/15th the initial amount borrowed.
First-Time Home Buyer Incentive
FTHBI is a resource to help ease mortgage costs by reducing monthly payments through Shared-Equity Loans. Up to 5% towards the down payment of a Resale Home and as much as 10% for Newly Built Homes.
Reasoning: By increasing the down payment amount, the FTHBI reduces monthly mortgage costs thus making homeownership more Affordable.
Shared-Equity Loan: Lenders will agree to give you a concurrent loan alongside your main mortgage in return for a share of any profits when you sell your home, or repay the loan.
Key Takeaways
Minimum Down Payment 5% of purchase price on the first $500,000 or less, and 10% above $500,000.
Numerous Down Payment Options available today to help you get into a home sooner using both traditional and non-traditional sources.
The smaller your mortgage and lower amount of interest you pay, the quicker you can start building Home Equity.
For any other real estate questions, contact us here.
If you’re looking to stay up to date on news on the Real Estate News, subscribe to our newsletter here for more insights and opportunities.
Key Words
Home Equity is the market value of a homeowner’s unencumbered interest in their real property. It is the difference between the home’s fair market value and the outstanding balance of all liens on the property.
Fair Market Value(FMV) is the price a property would sell for on the open market. Subject to conditions met. The Parties involved are aware of all the facts. They are acting in their own interest without any pressure to buy or sell, and have ample time to make the decision.
Encumbrances refers to any right to, or interest in, land held by 3rd persons, to the diminution of the value to the owner, sometimes restricting, but not prohibiting the ability to transfer the land, such as a Mortgage or Lien.
Lien is a form of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation.
Mortgage refers to a loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time. Typically in a series of regular payments that are divided into principal and interest. The property serves as collateral to secure the loan. A borrower must apply for a mortgage through their preferred lender and ensure they meet several requirements. Such as minimum credit scores and down payments.
Interest Rates is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the Principal Sum)