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How Much You Need For A Down Payment

How Much you Need for a Down Payment

When buying your first home or next one, lenders expect you’re going to put some money toward the purchase price. This is the down payment. Your mortgage covers the rest.

But how much are you required to put down?

It all depends on the purchase price of the home.

For a purchase price of $500,000 or less, the minimum down payment is 5%. So, if the purchase price is $450,000, you’ll need at least $22,500 for the down payment.

A purchase over that amount requires a 5% down payment on the first $500,000 and a 10% down payment on the remaining portion up to $999,999. Suppose the purchase price of your home is $800,000. You can calculate your minimum down payment by adding two amounts: 5% of the first $500,000, which is equal to $25,000, and 10% of the remaining balance of $300,000, which is equal to $30,000. Combined, your total down payment is $55,000, at a minimum.

For homes valued at $1 million or more, a minimum 20% down payment is required.

If your down payment is less than 20% of the purchase price of your home, you’ll typically need to obtain mortgage loan insurance, also known as mortgage default insurance. Mortgage loan insurance protects the mortgage lender in case you can’t make your mortgage payments.

Even if you have a 20% down payment, your lender may require that you get mortgage loan insurance. This is usually the case if you’re self-employed or have a poor credit history.

Your deposit forms part of the down payment. The deposit is the money paid upfront after your offer to buy a home is accepted. This is generally 5% of the purchase price and is due within 24 hours of offer acceptance.

The down payment, less the deposit, is due upon closing. It will generally come from the sale of your current home when moving from one property to the next. First-time buyers must have the full down payment. Most common avenues for this are savings, RRSPs, stocks, investments or a gift.