Home buyers, what if you can’t afford a 20% down payment? – Money Sense

For some Canadians, co-investing could make the dream of home ownership within reach, but what if you don’t have friends or relatives to put the money with in common, or if you prefer not to share your living space with other people? Then you have another option: co-own your home with Ourboro, a Canadian real estate investment company that helps first-time buyers enter the market. Currently, she works with buyers looking in the Greater Toronto Area (GTA).

Before we dive deeper into how the Ourboro condo model works, let’s take a look at what it takes to buy a home on your own.

What is the minimum down payment for a home?

To buy a house in Canada, you must have a minimum down payment of at least 5%, but in many cases it is 20%. This handy chart breaks down the minimum amounts based on the price of the home.

House purchase price Minimum deposit
$500,000 or less 5% of the purchase price
$500,000 to $999,999 5% of the first $500,000 of the purchase price; 10% of the portion of the purchase price over $500,000
$1 million or more 20% of the purchase price

You can buy a home with as little as 5% down, but if your down payment is less than 20% of the purchase price of your home, you will need to purchase mortgage default insurance (also called mortgage default insurance) . This coverage protects your mortgage lender in case you are unable to maintain your payments. The premium for mortgage loan insurance ranges from 0.6% to 4%, depending on how much you are borrowing relative to the value of your home, and is usually added to the principle of the mortgage, meaning you You will also pay interest on this premium.

Exceptions are homes over $1 million, for which mortgage insurance is not available. In other words, you must have saved 20% to buy a property over $1 million, which is not an unlikely scenario, given that the average sale price of a home in the GTA was greater than $1.2 million in April 2022; in Vancouver it was over $1.4 million. You won’t be able to buy the house without it.

What if your down payment is less than 20%?

If your down payment is not enough for the house you want to buy, several options are available to you:

  • Reduce your budget
  • Save for a bigger down payment and hope house prices don’t rise
  • Stick to your plan and pursue co-ownership

Should we wait for real estate prices to fall?

You could wait a long time. With rising interest rates, home sales in Canada have fallen year over year, but selling prices remain stubbornly high in the most expensive real estate markets, primarily in Ontario and British Columbia. .

For newbies hoping to enter the market, it can be frustrating and demoralizing to see a nest egg shrink in proportion to rising prices, before other home buying expenses such as closing and land transfer tax do not come into play.

About Matthew R. Dailey

Check Also

Bank of America Announces Small Business Down Payment Grant Program to Boost Growth of Women and Minority Businesses

New Special Purpose Credit Program Offers Down Payment Grants for SBA 504 and 7(a) Commercial …