Blog by Rebecca Permack

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Down Payment

How much will I need for my initial investment in my new home?

You'll need a combination of a down payment and closing costs.

The money that you pay up front for a house is the down payment. These payments typically range from 5 to 25% of the total value of the home. The obvious source of money for your down payment is either your savings or the proceeds from the sale of a home you already own.

While it is possible to buy a home with as little as 5% down, the amount of your down payment will determine whether you will have a conventional mortgage or an insured, high-ratio mortgage.

What's the difference?

  • Conventional mortgage: Your down payment is at least 25% of the purchase price.
  • High-ratio mortgage: Your down payment is less than 25% of the purchase price and must be insured by CMHC or GEMI. An insurance premium will apply.

Closing Costs

For high-ratio or insured mortgages, the mortgage provider requires the borrower to demonstrate his or her ability to cover closing costs in the amount of 1.5% of the value of the property. Closing costs can be as high as 3% of the value of the property being purchased and can vary widely depending on:

  • The property being purchased
  • Services required
  • Taxes
  • Applicable insurances
  • Whether the home is new or old
  • Closing dates affecting interest adjustments
  • The balances of any prepaid expenses