Greater Savings With a Larger Down Payment

The size of a down payment can vary. Depending on the type of mortgage, a down payment generally ranges from 5% to 20% of the purchase price.

To obtain a conventional mortgage, home buyers are required to put down at least 20% of the purchase price or appraised value (whichever is less) as a down payment. If you don't have the necessary time or resources to save a whole 20% down payment, you can choose a high-ratio mortgage and buy a home with a down payment of as little as 5%. This option is called a high-ratio mortgage, and it requires you to purchase default insurance.

Whether you choose a conventional or a high-ratio mortgage, one thing that is almost always certain is the larger your down payment, the more you save in the long run.

Want more information? Visit the Canada Customs and Revenue Agency Publication.

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A Larger Down Payment

Reduces the amount of your monthly principal and interest payment
Reduces the total amount of interest you pay over the life of your mortgage

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Ask about the RSP Home Buyers Plan

The RSP Home Buyers' Plan (HBP) lets a first-time buyer withdraw up to $25,000 from RSPs for a home purchase. The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment of 1/15 of the amount withdrawn. If the whole $25,000 is withdrawn, the minimum annual repayment is $1,333. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer's income.

Insuring Your High-Ratio Mortgage

CMHC or Genworth Financial may insure a mortgage for up to 95% of the lending value of the house. Therefore, purchasers do not need a large down payment. Eligible borrowers include anyone who buys a home in Canada intending to occupy it as their principal residence. And the availability of government-backed mortgage insurance is restricted to homes with a value of $1 million or less

Purchasers can use up to 39% of their gross family income for payments of mortgage principal and interest, property taxes, and heating. A buyer's total debt load (including consumer loans, etc.) cannot exceed 44% of the gross family income.

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People who insure a mortgage loan with CMHC or Genworth pay a premium. The premium is based on the down payment and loan amount. A list of mortgage insurance premiums can be found here.