When buying a house, one of the key financial considerations is the down payment. The down payment is the initial payment made towards the purchase price of the property and is typically expressed as a percentage of the total price. So, how much down payment on a house do you need?
In Canada, the minimum down payment required depends on the purchase price of the property:
For homes priced below $500,000, the minimum down payment is 5% of the purchase price.
For homes priced between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of the remaining portion.
For homes priced at $1 million or more, the minimum down payment is 20%.
For example, if you're buying a home for $600,000, your minimum down payment would be calculated as follows:
5% of the first $500,000 ($500,000 x 5%) = $25,000
10% of the remaining $100,000 ($100,000 x 10%) = $10,000
Total minimum down payment = $25,000 + $10,000 = $35,000
It's important to note that a higher down payment can lead to lower monthly mortgage payments and may also help you avoid paying for mortgage default insurance. However, it's crucial to ensure you have enough savings set aside for other costs associated with buying a home, such as closing costs, moving expenses, and potential renovations.
