Dominion Lending is a mortgage and leasing company with more than 2,000 members offering free expert advice across Canada for all your mortgage needs:
- Residential Mortgages
- Commercial Mortgages
- Equipment Leasing
Mortgage Questions
Down Payment
All lenders expect you to put some cash down on your home purchase. This is Down Payment and the minimum here in Canada is 5% of the purchase price. A Down Payment less than 20% makes for a high ratio mortgage and although you can get the same interest rate as someone applying for a conventional mortgage (>20% down), there will be CMHC (or Genworth) insurance fees attached, according to the Bank and Trust Company Acts. The amount of insurance fees charged is relative to the mortgage size and your down payment amount - the current level of equity in the home. So remember, the more money you can save and put toward down payment, the lower your mortgage and payments will be!
Down Payment becomes increasingly important if your credit history is less than great. Some lenders will overlook past credit blemishes, not verify income and other financial status, if you have 35% to 40% of the purchase price for your down payment. No Income Verification.
This equity that you build in the home goes to the banks in the unfortunate event of foreclosure. Hence, the larger the down payment the more protection the banks have. This is why your CMHC (or Genworth) fees are higher if your down payment is lower. For CMHC fees, see here.
Tip:
Be sure to have your down payment ready at least 30 days before you apply for a mortgage loan.
Ways to Accumulate a Down Payment
- Start saving as much as you can as soon as you can. If you've already talked to mortgage lenders and they've informed you that your down payment is insufficient, make it a priority and find ways to save money such as foregoing a new car or a vacation trip.
- If you have enough equity in your RRSP, you can borrow the money from your account up to $25,000
- Down payment can be borrowed from a secured line of credit (this is called a flex down product and is subject to different qualifying criteria) or can be gifted from a family member
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Down Payment
All lenders expect you to put some cash down on your home purchase. This is Down Payment and the minimum here in Canada is 5% of the purchase price. A Down Payment less than 20% makes for a high ratio mortgage and although you can get the same interest rate as someone applying for a conventional mortgage (>20% down), there will be CMHC (or Genworth) insurance fees attached, according to the Bank and Trust Company Acts. The amount of insurance fees charged is relative to the mortgage size and your down payment amount - the current level of equity in the home. So remember, the more money you can save and put toward down payment, the lower your mortgage and payments will be!
Down Payment becomes increasingly important if your credit history is less than great. Some lenders will overlook past credit blemishes, not verify income and other financial status, if you have 35% to 40% of the purchase price for your down payment. No Income Verification.
This equity that you build in the home goes to the banks in the unfortunate event of foreclosure. Hence, the larger the down payment the more protection the banks have. This is why your CMHC (or Genworth) fees are higher if your down payment is lower. For CMHC fees, see here.
Tip: Be sure to have your down payment ready at least 30 days before you apply for a mortgage loan.
Ways to Accumulate a Down Payment
- Start saving as much as you can as soon as you can. If you've already talked to mortgage lenders and they've informed you that your down payment is insufficient, make it a priority and find ways to save money such as foregoing a new car or a vacation trip.
- If you have enough equity in your RRSP, you can borrow the money from your account up to $25,000
- Down payment can be borrowed from a secured line of credit (this is called a flex down product and is subject to different qualifying criteria) or can be gifted from a family member