How much is a Down Payment on a House?
Posted Jun 1st 2023
The amount you need for a down payment will depend on different mortgage guidelines, like the price of the home you’re buying and the requirements of your mortgage lender. Bigger is usually better when it comes to down payments in Canada, but you don’t always have to put 10% or 20% down to buy a house.
What Is A Down Payment?
This is the amount you need to pay upfront when you get a mortgage, and this represents a portion of the price of the house you are hoping to purchase. In most cases, a down payment is usually made in cash, while the remainder of the cost of the house is covered by the mortgage. The bigger the down payment, the smaller your mortgage.
How Much Do I Need For A Down Payment?
There are specific guidelines surrounding minimum down payment sizes in Canada, and they will depend on the price of the home. According to the Government Of Canada, Homes under $500,000 will require a minimum down payment of 5%, while homes between $500 000 and $999,999 will require 5% for the first $500,000 of the purchase price and 10% for the amount above $500,000. Homes that cost one million or more will require a minimum down payment of 20%.
Some buyers may need to provide a larger down payment than the minimum requirement based on their specific circumstances. For instance, those with a poor credit history or who are self-employed may need to put down more. Additionally, if the monthly mortgage payment for a particular home is too high for a buyer’s budget, a larger down payment may be necessary to reduce the mortgage size and make the payments more affordable.
If your down payment is less than 20%, you will have to buy mortgage default insurance to protect the lender in the event that you cannot pay your mortgage.
The amount needed for a down payment may seem overwhelming, and it’s natural to feel nervous about this very big number. The good news is there are ways to save for a house down payment, and you can do any of the following:
- Budget: Look at your monthly spending and see where you can reduce costs to save money. Lowering your day-to-day expenses will help, but you will also have to make bigger cuts if you are serious about buying a home. Whether it’s driving a cheaper car or cutting out vacations, you need to prioritize what is important and budget accordingly.
- Reduce your debt: It is almost impossible to save when you are making monthly payments to creditors, and this is why you have to try to pay off debts.
- Start a savings account specifically for your down payment: A tax-free savings account or high-interest savings account can be very helpful, and you can also automate these accounts and transfer money to them every time you get paid.
Your Guide to Finding Your Dream Home
Are you ready to buy your dream home? You will have to work with a reputable real estate agent, and the Baird Team will help you navigate this process. We will help you look at homes for sale and will focus on houses that match your criteria. Whether you want to look at homes or townhouses for sale, we will present you with listings that are within your budget.
You can contact us anytime at 905-242-2716 to start your search!