Your Down Payment

What’s a down payment? It’s the upfront money you pay towards your home to secure some equity. The size of your down payment can impact the home price you can afford, your mortgage payment, and whether you’ll need mortgage default insurance.

Where can it come from? Saving for your down payment is a key step. Lenders have specific rules about where the funds come from and usually require a 90-day history of the money being in your account. To make things easier, keep the funds in one savings account without transfers during this time. Plus, your realtor will want to know your down payment is ready before you start house hunting.

Why do you pay an insurance premium with less down payment?

When your down payment is less than 20% of the home’s purchase price, you’re required to have default insurance from one of the three insurers - Sagen, CMHC (Canada Mortgage and Housing Corporation), and Canada Guaranty. This insurance is a federal requirement designed to protect the lender in case you’re unable to make your mortgage payments.

While this might seem like an extra cost, there are some benefits. For starters, it allows you to buy a home with a smaller down payment, which can make homeownership more accessible. Plus, it opens the door to mortgage options that might not otherwise be available. It’s a small trade-off for getting into your home sooner.

Insured or conventional?