How much should I budget for a down payment?
While housing costs may vary, the down payment will be the biggest upfront cost for your home. The minimum down payment you’ll need depends on the cost of the home you want to buy. Keep in mind too that some institutions may require a higher down payment if you are self-employed or have a low credit score. The minimum down payment you can afford depends on your income and savings.
There are 3 tiers which determine the minimum down payment required:
- If the home you want to purchase costs $500,000.00 or less, the minimum down payment is 5.00%.
- If the home costs between $500,000.00 and $999,999.99, the down payment is 5.00% on the first $500,000.00 and 10.00% on the remaining cost.
- If the cost of the home is greater than $1 million dollars, the down payment must be 20.00%.
If your down payment is less than 20.00%, your loan is considered a “high-ratio mortgage” and you’ll need to pay for mortgage loan insurance. This additional insurance provides the lender protection should you default on your mortgage. Because mortgage loan insurance is commonly obtained through the Canada Mortgage and Housing Corporation, it is often referred to as CMHC insurance. Even with a 20.00% down payment, lenders may require you to purchase mortgage loan insurance if your credit score is low or if you’re self-employed. Premiums for mortgage loan insurance typically range anywhere from 0.60% to 4.50% of your mortgage.