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“How much down payment do you need for a house?” — and other big home buying questions

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Buying a home is a huge milestone—one that you should be excited about even considering! 

It's also a big investment.

Usually, when people say that home buying is an investment, they're talking about the financial cost. But it's also an investment of your time because before you land the home of your dreams, you'll need to do a lot of research and planning. 

And one of the first steps in the planning phase is to determine how much money you can afford to spend on a down payment for a house.

To make it easier, here’s a breakdown of everything you need to know about down payments.

What is a down payment on a house?

A down payment is the cash contribution you need to provide in order to complete the purchase of your home.  Down payments will range from 5% to 20%, depending on the price of a home. 

Now, let’s break down the costs of a down payment.

How much is a down payment for a house? 

Before you can answer this question, you need to know the final purchase price of your future home (but for your initial calculation, an estimate will do!).

In Canada, your minimum down payment amount varies depending on the price of the property you’re purchasing.

Here’s an example breakdown: 

  • For homes that cost $500,000 or less, the minimum down payment is 5%.
  • For homes that cost between $500,000 and $999,000, the minimum down payment is 5% for the first $500,000, then 10% of the remaining portion.
  • For homes that cost $1 million or more, the minimum down payment is 20%.

Tip: All mortgages registered through a major financial institution where the down payment is less than 20% and the home sale price is below $1 million will require something called mortgage insurance. 

Wait, what’s mortgage default insurance? Do I need it?

Mortgage insurance carries its own financial stipulations and potential HST charges, so make sure you understand from your mortgage lender exactly how—and when—additional funds will need to be paid. 

What can be used for a down payment? 

Once you’ve found the place you’re hoping to call home, it’s time to gather the funds needed to seal the deal.

If buying a home is something you’ve been planning for a while, you probably have a good chunk of change saved for this very occasion. But where else can you draw a down payment from if needed? 

Here are some potential sources you can use: 

  • Personal savings 
  • Gifts and loans from family and friends 
  • Home equity (FYI: Properly’s Instant Estimate tool can tell you what your current home is worth today) 
  • Down payment assistance programs 

The size of your down payment will affect more than just the home you can afford—it also affects the type of mortgage you qualify for, and whether you’ll be required to purchase mortgage default insurance. 

Related topic: How to Get a No Down Payment Mortgage 

What about home buying programs, plans, and incentives?

Buying a home isn’t cheap, but there are a number of programs to make it easier to break to afford. 

The Home Buyers' Plan in Canada (HBP), for instance, allows borrowers to withdraw $35,000 from their RRSP and use it as a down payment. 

Before going this route, you’ll want to ensure you can realistically repay the borrowed money within 15 years. Failing to pay back the entire amount within that time frame can cost you a lot of extra income tax. It’s also a good idea to consider what impact this has on your retirement savings, particularly since withdrawing from an RRSP means you could lose out on potential growth while the funds are withdrawn.

First-time home buyers also have their own incentives. The Government of Canada offers loans of 5% of the purchase price if you buy an existing home, or 5-10% of the purchase price if you buy a newly constructed home. The incentive has to be repaid within 25 years or when the property is sold. It can also be repaid earlier without penalty.

Is a down payment the same as a deposit?

It’s not! While a down payment is paid at closing, a deposit is paid upfront (usually within 24 hours of your offer getting accepted). 

The deposit shows the seller that you’re committed to buying their home and is most often paid via certified cheque or bank draft. 

How much do you need for a deposit? 

There’s no minimum amount required but a general rule of thumb is 5% of the purchase price. So if you’re buying a house for $800,000, you may make a $40,000 deposit. 

Once the deal closes, your deposit will be applied to the purchase price of your new home! Depending on your bank and the location of your assets, it may take a few days for the cash to become available, though. That’s why it’s important to talk to your bank in advance to confirm that your funds will be available when you need them. 

Need help with a down payment or other closing costs?

There’s a lot to learn about buying a home, but you don’t have to figure it out on your own. 

Connect with a team who knows the ins and outs of the process for help. Financial advisors, mortgage brokers, and agents (like the real estate agents at Properly!), can walk you through the process and set you up for success. It’s easy to book a free consultation today. 

Now that you’ve gotten the low-down on down payments, we hope the process—and cost—of purchasing a new home is a little clearer. Happy house hunting!

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*DISCLAIMER: This article is provided for informational purposes only. It is not an exhaustive review of this topic. The content is not financial or investment advice. No professional relationship of any kind is formed between you and Properly, Properly Brokerage, or Properly Homes. While we have obtained or compiled this information from sources we believe to be reliable, we cannot and do not guarantee its accuracy. We recommend that you consult a trusted professional before taking any action related to this information. Properly is a tech-enabled real estate brokerage that is transforming the home buying and selling experience with AI-powered home valuations, Sale Assurance, and a modern streamlined service. We recommend that you compare and contrast your options, read the fine print, and conduct detailed research into any real estate, loan, and/or investment provider before using their services.*
Properly is a Canadian tech-enabled real estate brokerage transforming the home buying and selling experience as the only service in Canada that helps homeowners to buy before they sell.

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