While it is possible to buy a home with as little as 5% down, the amount of your down payment will determine whether you'll have a conventional mortgage or an insured, high-ratio mortgage.
What's the difference?
- Conventional mortgage: means your down payment is at least 20% of the purchase price.
- High-ratio mortgage: means your down payment is less than 20% of the purchase price.
High ratio mortgages must be insured by a third party such as the Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada or Canada Guaranty and require you to pay an insurance premium.
The insurance premium:
- Will depend on the amount you are borrowing and the percentage of your down payment (Usually, mortgage default insurance premiums range between 0.5% and 2.75% of your total mortgage amount)
- Can be added to the principal balance and paid off as part of your mortgage, or paid off in a lump sum at the time of purchase (may be subject to provincial sales tax which cannot be added to mortgage amount)