Lets talk about down payments today for those of you who are perhaps new to this whole home buying business.
A down payment is the amount of money that you put towards the purchase of a home. The down payment is deducted from the purchase price of your home. Your mortgage loan will cover the rest of the price of the home.
The minimum amount you'll need for your down payment depends on the purchase price of the home:
If the purchase price is $500,000 or less you will need 5% of the purchase price as a down payment. $500,000 to $999,999 - you will need %5 on the first $500,000 of the purchase price and 10% for the portion of the purchase
price above $500,000 and $1million or more you will need a down payment of 20%.
If you're self-employed or have a poor credit history, you may be required to provide a larger down payment.
If you know you are going to struggle to come up with the down payment, you may be eligible for the Home Buyers' Plan (HBP). The Home Buyer's Plan allows you to withdraw up to $25,000, tax-free, from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home. You have up to 15 years to repay the amounts you withdrew. However, keep in mind that not making the repayments could end up costing you a lot of money in income tax and even though you'll eventually repay the funds, you may still lose out on any growth while the funds are withdrawn.
Any questions on downpayments, have your sights on a house but not sure if you can afford it, we can chat and I can refer you to my friend and mortgage expert to help.