A mortgage down payment in Canada – Know the requirements before taking the plunge
Are you a resident of Canada who is wondering about getting a house? Are you looking to upgrade your property? Are you wanting a house in order to cancel the rent payments that are adding to your budget and are increasing your monthly payments? If answered yes, you should be aware of the fact that you require paying down a certain amount while taking out a home mortgage loan so as to grab the best competitive rate on the home mortgage loan. If you’re not able to pay down this amount (which is usually 20% of the loan amount), you might have to pay the PMIs or the Private Mortgage Insurance payments so as to help reduce the risk of the lender. Although the amount that is required as down payment depends on the individual properties and the lenders, there are some other factors like credit score and DTI ratio that can change the interest rates on the mortgage loan. Read on the concerns of this article in order to know the details of mortgage down payment in Canada.
What actually is a mortgage down payment?
A mortgage down payment is a specific amount of money that a borrower has to deposit towards the purchase of a new home in the market. This particular amount is relative to the value of the home that you’re about to purchase and the bigger your down payment is, the bigger will be the mortgage loan that you will be approved and the interest rates will also be affordable. This is because the larger down payment results in smaller interest payments throughout the term of the loan.
What are the down payment requirements for getting a Mortgage in Canada?
The minimum down payment that is required in Canada is 5% of the total loan amount and the typical down payment that ranges from 5%-20% of the price of the home. As per the TD Canada Trust Home Buyers Report, 30% of the prospective homebuyers have at least 20% of the loan amount in order to avoid the Private Mortgage Insurance payments. In the year 2012, the home purchase prices above $1 million and this will require 20% of the loan amount. The mortgage default insurance, referred to as CMHC insurance, protects the lender in case the borrower defaults on the mortgage payments as well as offer other mortgage options, such as a reverse mortgage brokers provide. In case of a conventional mortgage lender, the down payment might be lower than 20% of the loan amount.
What factors are influenced by your down payment?
The amount that you pay down at the beginning of the mortgage loans shapes three important factors throughout the life of the mortgage. What are they? Check them out.
The home price that you can afford within your budget: As the minimum mortgage down payment of a mortgage loan in Canada is 5%, this is the benchmark that is used to determine the maximum affordability. For instance, if you’ve saved $30,000 for the down payment on the mortgage, the maximum mortgage amount that you could afford would be $30,000/5% which is equivalent to $60,000. You should calculate your mortgage affordability and down payment through a mortgage calculator.
The mortgage monthly payments: The mortgage down payment will also let you calculate the amount that you have to pay towards the mortgage loan. The larger your down payment, the lower will be the amount that you might have to pay on the mortgage loan. Therefore, you should save for the exact amount and then ensure getting a mortgage that is within your means. Some people feel it is better to use a CMHC Mortgage Calculator so they have an idea of their costs.
Apart from the home price and the monthly payments, the amount that you might have to pay towards the mortgage insurance will also be determined with the amount that you can pay down. Save as much money as possible and then take the plunge into the mortgage market bandwagon. Help yourself choose the best mortgage loan and maintain the payments so as to avoid a hit on your credit score. For More Details Please Contact Glen so they have an idea of their costs. contact Glen and we will refere you to one of our great lenders that would be ideal for you specific situation.