Exploring down payment options
A common question among those looking to purchase their first home is how much should be put towards the down payment.
A recent survey revealed that the average Canadian home buyer expects to spend $300,000 on their first home. Many first-time buyers have an idea in mind of how much they are willing to spend, but many are left wondering how much they should save for a down payment.
The Canadian Mortgage and Housing Corporation (CMHC) mandates that Canadian home buyers must have a minimum down payment of 5% of the purchase price. However, anything less than 20% is subject to CMHC mortgage insurance, thus adding to your mortgage. Those with a 20% down payment or more not only avoid paying CMHC insurance fees, but have the option of choosing a longer amortization period for their mortgage.
First-time buyers also have the option to take advantage of the Home Buyers Plan, which allows first-timers to withdraw a maximum of $25,000 from an RRSP to be used toward the purchase of a first home. The withdrawal is tax-free, but must be paid back over a period of no more than 15 years.
What is your down payment plan? Talk to an Ottawa Mortgage Broker.