DOWN PAYMENT ESSENTIALS

The down payment is the what you pay toward the price of your home on the closing date. Home financing will cover the rest.

  • 5% / 10% : For a default insured mortgage, a minimum down payment of 5% is required for a home with a purchase price up to $500,000. For a purchase price greater than $500,000, a minimum down payment of 5% is required on the amount up to $500,000 and 10% is required on the balance of the purchase price up to $1,000,000.
  • 20% : The minimum down payment required to avoid purchasing mortgage default insurance

FINDING YOUR DOWN PAYMENT

The first step in figuring out how much you can afford is to work out how much money you have for the down payment.

  • Your Savings: The money you have saved that you can put towards your new home. 
  • RRSP: RRSP can be used towards the down payment for your first home.
    • Withdraw up to $25,000 / person
    • Repay within 15 years to avoid tax impact
  • Family Support: Financial gifts from family members can be used towards your down payment, which will lower your total borrowing amount.  

how much can i afford?

Down Payment Borrowing Limit Maximum Property Value

Borrowing limit is determined by the following:

- Household income

-Property taxes

-Other Outstanding debts

-Recurring household expenses like utilities and condo fees


VARIABLE OR FIXED RATE?

"I think interest rates will be going up in the future. I don't like taking risks and I like to know where I stand. My household would not be able to manage increasing payments" 
  • Agree: FIXED RATE is recommended. Your interest rate and payments remain the same throughout the term.This means you'll know exactly how much to budget for and what you'll still owe at the end of the term
  • Disagree: VARIABLE RATE is recommended. Your rate changes with the BMO® prime rate but your payments stay the same. If rates fall, more goes towards the principal. If they rise, more goes toward interest.

open or closed?

"Paying down my mortgage quickly is more important than interest rate. I may occasionally have significant extra funds to contribute, and I am not willing to pay a prepayment charge in order to do so"
  • Agree: OPEN is recommended. You can repay all or part of your mortgage at any time without prepayment charges. While you can pay off your mortgage faster, you may pay a higher interest rate.
  • Disagree: CLOSED is recommended.The Interest rate is usually lower than an open mortgage, but your prepayment options are limited.  

what term length for my fixed mortgage?

"I like stability with my financial commitments. I would feel more secure if I knew my interest costs were stable for a defined period. I can't risk the possibility of my payments increasing"
  • Agree: LONGER TERM is recommended. Select a longer term mortgage (3-10 years) as this give you the security of stable interest rates and payments for up to 10 years.
  • Disagree: SHORTER TERM is recommended. Select a shorter term (less than 3 years). You'll usually get a lower interest rate, but won't have the security of stable interest rates and payments available with a longer term.

what should my amortization period be?

"I want to pay off my mortgage in the shortest time possible"
  • Agree: SHORTER TERM is recommended.Usually higher monthly payments than a longer term.
  • Disagree: LONGER TERM is recommended. The maximum amortization on most mortgages is 30 years. Usually lower monthly payments than a shorter term. If your down payment is less than 20%, the maximum amortization is 25 years.