What is the minimum amount required for a down payment?
Most people believe that the minimum down payment for purchasing a new home is 20 percent. The good news is that that is not the case. In fact, it is possible to purchase a new home with as little as a 5 percent down payment, but this depends on the actual cost of the home.
On February 15, 2016 the down payment rules changed. The new rule to abide by is that homes worth less than $500,000 will require a minimum of 5%, while those over $500,000 require a 5% down payment on the first $500,000 and 10% on the remaining balance of up to $1 million. Homes with a purchase price if $1 million or more require a minimum down payment of 20%.
Having a smaller down payment does come at a price. Borrowers with less than a 20% down payment are required to pay for Mortgage default insurance, or CMHC insurance. This protects the lender is case of a default on mortgage payments. Down payments of 10% or higher are not required to have this insurance. Luckily, first-time homebuyers are allowed to withdraw up to $25,000 from their RRSPs for a home purchase, which could help bump up a down payment.
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