Her is a little insight to minimum down payment requirements and the two types of mortgages that are available for home buyers.
High ratio mortgages are when you have less than 20% of the purchase price for down payment available. Your mortgage is required to be insured by one of Canada’s three Mortgage insurers. CMHC, Sagen or Canada Guaranty. The insurance premiums are also scaled based on your down payment. Mortgage insurance will apply and be added to the total mortgage amount. This is a Canadian requirement with all banks. Here is a link to my Purchase Calculator so you can see what the cost is based on how much you have for down payment and insurance is required.
Conventional mortgages are when you have more than 20% of the purchase price for down payment. The 20% is calculated based on the total purchase price which allows you to avoid having to pay for mortgage insurance. For any purchase price over $1.5 million, you are required to have 20% down or more.
Rental properties also require a minimum of 20% down payment.
Down payment funds must be in your name for a minimum of 90 days and we require bank statements or investment statements confirming the funds are in your name.
If they are being gifted by an immediate family member, a gift letter is required for you and your family member to sign confirming that the gift does not require repayment, and the funds must be deposited into your bank account a minimum of 15 days prior to completion of the purchase. We will also require a printout of your bank statement showing the gifted funds deposited. The amount deposited must match the gift letter to the penny.
Interest rate rates are also set based on their down payment. For high ratio mortgages, there are often lower interest rates compared to conventional mortgages. Don’t be alarmed when you see different rates being offered and also don’t be fooled looking at advertisements online with rock-bottom interest rate rates and think that they apply to conventional mortgages.
The best way to navigate this is to contact us directly so we can walk you through the process step-by-step on how you will be affected with your upcoming purchase and what your minimum down payment requirements look like.