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Mortgage Down Payment Canada: A Guide to Understanding Your Options
February 2, 2023 | Posted by: Matt Broom-Hall
Mortgage Down Payment Canada: Understanding the Requirements and Options
When buying a house in Canada, one of the biggest expenses is the down payment. In this article, we will answer some frequently asked questions about the mortgage down payment in Canada, including the average amount, requirements, and options.
Do You Need 20% Down in Canada?
The minimum down payment required by law in Canada is 5% for homes that cost up to $500,000. For homes over $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the portion of the purchase price above $500,000. This means that if you buy a $300,000 home, you will need to put down at least $15,000 (5% of $300,000). However, if you buy a $700,000 home, you will need to put down at least $45,000 ($25,000 for the first $500,000 and $20,000 for the remaining $200,000).
Can You Put 5% Down on a House in Canada?
Yes, you can put 5% down on a house in Canada, but you will need to pay for mortgage default insurance if your down payment is less than 20%. The cost of the insurance varies based on the size of the down payment and the purchase price of the home.
What is the Average Down Payment on a House in Canada?
According to the Canadian Mortgage and Housing Corporation (CMHC), the average down payment for a home in Canada is around 9%. This is because many buyers opt for a higher down payment to avoid mortgage default insurance, lower their monthly mortgage payments, and build equity faster.
How Much Do I Have to Put Down on a $300,000 House?
If you buy a $300,000 home, you will need to put down at least $15,000 (5% of $300,000). However, if you want to avoid mortgage default insurance, you will need to put down at least 20% of the purchase price, which is $60,000.
Should I Put 5% or 20% Down Payment?
Whether you should put 5% or 20% down payment depends on your financial situation and goals. If you have a large amount of savings and can afford a higher down payment, a 20% down payment will lower your monthly mortgage payments, help you avoid mortgage default insurance, and build equity faster. On the other hand, if you have limited savings, a 5% down payment may be more feasible, but you will need to pay for mortgage default insurance.
What if I Don't Have 20% Down?
If you don't have 20% down, you have two options: 1) save for a larger down payment or 2) buy with a 5% down payment and pay for mortgage default insurance. Mortgage default insurance protects the lender if you default on your mortgage, but it increases your monthly mortgage payments.
Is it OK to Put 5% Down on a House?
Yes, it is okay to put 5% down on a house, but you will need to pay for mortgage default insurance. This insurance protects the lender if you default on your mortgage, but it increases your monthly mortgage payments.
In conclusion, the mortgage down payment in Canada ranges from 5% to 20%, depending on the purchase price of the home and the buyer's financial situation. When buying a house, it's important to consider your down payment options, including the amount, mortgage default insurance, and monthly mortgage payments.