"I want to buy, but I don't have enough down payment"

I'm sure this is a statement we have said to ourselves, or have heard from a family member or friend. We're confident we want to buy, but we're unsure of how to get started. Or, we're just waiting for the day we have enough down payment saved up -- but how much down payment do we really need?

Growing up, our parents have always taught us to put at least 20% down payment towards a property. Of course that is the ideal situation, but how can we save 20% down payment, while catching up to the ever increasing market? 

Besides that point, most young home buyers (millennials) don't know that they have the option to put less than 20% down payment. Yes, they have to pay insurance premium, but do they understand how it works?

Less than 20% Down Payment - What Should I Know?

KEY POINTS

• Down payment between 5% to 19.99%

• Property must be under $1M

• 25 Year Amortization

• Borrower pays insurance premium

• Insurance premium is topped onto the mortgageLower mortgage rates, as borrower pays insurance premium

Why is there insurance premium?

When a borrower has down payment between 5% to 19.99% they are required to pay insurance premium. Please note that this insurance premium is not paid upfront, bur rather topped onto the mortgage. Because the borrower is putting less than 20% down payment, the lender is at a higher risk as the lender now has more equity in the property than the borrower themselves. Mortgage default insurance protects the lenders, as the risk is passed onto the insurers. The benefit of mortgage insurance is it allows those with less than 20% down payment access into the real estate market!

"I'm looking for an entry level condo... how much do you think I can afford based on my income and savings?"

These figures are based on average current rates as of February 4th, 2019. Please note that this is an estimation of gross annual income over principal, interest, property tax and strata fee payments. This is only provided to give you an estimate. Note that your individual scenario will differ depending on your income, debts, etc. Please inquire with Jessica Kuan to obtain a pre-approval, and find out what your maximum mortgage amount is based on your own personal financials and goals.

To find out what the insurance premium is based on your loan to value, please visit:

https://www.cmhc-schl.gc.ca/en/finance-and-investing/mortgage-loan-insurance/mortgage-loan-insurance-homeownership-programs/cmhc-mortgage-loan-insurance-cost