Down Payment Options
Mortgage Down Payment Options
When buying a home, your down payment is the portion of the purchase price you pay upfront. In Canada, there are several ways to cover your down payment.
Minimum Down Payment
- For homes under $500,000, the minimum down payment is 5% of the purchase price.
- For homes over $500,000, it’s 5% for the first $500,000 plus 10% for the portion over $500,000.
Gifted Down Payment
- Family members can gift money for your down payment.
- The gift must come with a signed letter confirming it’s not a loan and does not need to be repaid.
- The gifted funds must be in the account for at least 90 days prior to mortgage application to qualify.
Borrowed Down Payment
- Some buyers use a loan or line of credit to cover part of their down payment.
- Lenders may require proof of repayment ability and factor it into your mortgage application.
Using Savings
- Many buyers use personal savings or investments to fund their down payment.
- Programs like the RRSP Home Buyers’ Plan or FHSA allow you to use tax-advantaged savings.
Things to Consider
- The size of your down payment affects your mortgage rate, monthly payments, and mortgage insurance requirements.
- A larger down payment can reduce your loan-to-value ratio and lower your monthly payments.
