Buying a home? Mortgage Down Payment

The question is what is a mortgage down payment?  Answer!  The portion of your new home purchase price in which you pay upfront yourself.  The amount of the down payment which represents your financial commitment in the purchase.  This needs to be done before you start house hunting.  To secure a conventional mortgage and avoiding additional carrying cost (insurance) you will need 20% down of the total purchase price.  Or, by applying for a low down payment insured mortgage with as little as 5% down.  Due to government legislation, low down payment mortgages must be insured to deal with potential default of payment.  With this, you will be charges  a percentage on top of the loan amount and will be amortized throughout the period (length of time) of the mortgage. This surcharge will depend on your contribution to the down payment.

Some quick ideas to save that down payment:

1.) Set up automatic savings plan from your bank.  Live with in your means and pay for your future first.

2.) Use your RRSP as a down payment. You can use up to $25000 or $50000 for a couple.  With this you have 15 years to payback the RRSP but with annual contributions this shouldn't be an issue.  But remember your funds must have been in place 90 day's prior to possession.

3.) Which seems to be more in common these day's but a cash gift from parents or a relative.  Your financial institution will need a letter to prove it is a cash gift.

The bottom line is, before you can start the process of buying a home it is a great idea to sit down with your financial adviser and learn the process.  Ask the questions and ask what the payment will be.  Remember, your not just paying a mortgage you are building a future.

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