How Much Down Payment Will I Need?

How much is your down payment?

Your lender will need to know how much of a down payment you have. Any mortgage with financing that is more than 80% of the property value will usually need to be insured in order to protect the lender. CMHC and Genworth may insure a mortgage up to 95% of the value of the house. This means that if you were to purchase a house for $200,000 with 5% down you would need $10,000 as a minimum down payment.

This insurance of course has costs that are passed onto the buyer. The application costs approximately $165 and the insurance premium on the property can run up to 3.15% of the mortgage amount, which is included in your mortgage and paid monthly. Remember that you will also need funds for your closing costs. Appraisals, legal fees, land transfer tax, are just a few. 1.25% of the purchase price is usually what I suggest to have in addition to your down payment.

You will need to have over a 20% down payment in order to save the mortgage insurance fees, keep in mind that this can also come in the form of a gift from family or friend. This will save you a large chunk of money. For example here are some costs on a $200,000 home with no down payment the mortgage insurance would be 3.1% or $6,200 added to your mortgage. If amortized over 25 years it would cost you $13,605 and over 40 years would be $19,330. So if there is any possible way for you to stay away from mortgage insurance….do it!

Wade