![]() If you can afford it, making a down payment of 20% or more will allow you to avoid having to pay for mortgage default insurance, and it can give you more flexibility in your financing options. As a result, lenders often offer the lowest mortgage rates for low or minimum down payment mortgages. CMHC mortgage insurance), which offsets most of the risk to the lender. This is because borrowers will pay for mortgage insurance (e.g. Mortgages with a down payment of less than 20%, or high-ratio mortgages, usually have lower mortgage rates than low-ratio mortgages with a down payment of 20% or higher. Special programs for newcomers may require a higher down payment, however. ![]() Newcomers to Canada, such as recent immigrants, may qualify for a mortgage even without a Canadian credit history. This can be due to a variety of reasons, such as if you are self-employed or if you have a poor credit history. Your mortgage lender may require you to make a higher down payment in order to qualify for a mortgage from them. As a result, you can avoid paying for mortgage insurance. On the other hand, a down payment of 20% or greater gives mortgage lenders more flexibility in case you default on your mortgage or property prices go down. Having less equity in your home also means that it will be more difficult to qualify for a mortgage refinance or products such as a home equity line of credit (HELOC), which can have loan-to-value requirements. If you have a larger outstanding mortgage owing, your monthly mortgage payments could be significantly higher. While you will have to pay less upfront today, you will have to pay more in interest over the long run compared with making a higher down payment at the same interest rate.Īnother disadvantage shows up in the mortgage stress test where you must show that you can still afford mortgage payments even if the interest rate rises to the mortgage qualifying rate. With the minimum down payment of 5% for properties under $500,000, you will have a larger mortgage and have to pay a CMHC insurance premium of up to 4%. The amount of your down payment affects what opportunities you’ll have for your mortgage. ![]() Is making just the minimum down payment for a mortgage bad? Minimum Down Payment (% of Purchase Price)ĥ% of the first $500,000, then 10% of remainder
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