Mortgage Basics 101: What is a down payment?

Hi, Ryan Zupan here with City Wide Financial.  Today, we’re going to continue our series of talks on the basics of a mortgage & talk about down payment.  Let’s say I want to buy a $500K condo here in Vancouver.  Well, most of us don’t have $500K sitting under our mattress, ready to buy a home with, so I’m going to have to buy some money – I’m going to need a mortgage.  But, I’ve managed to save a few thousand here & there & have $25K ready to put into the purchase of my home.

That $25K of my money is my down payment.  Down payment is the amount of equity you’re putting into your home.  So you have your down payment (equity) & your mortgage (debt).  Down payment + mortgage = purchase price.  The minimum down payment here in Canada is 5%.  There are programs available where you can borrow that 5%.

For down payments between 5-20%, you need to purchase mortgage insurance.  I will discuss this in my next video, but you’ve probably heard the word CMHC used a lot lately, that’s mortgage insurance.  So, for down payments between 5-20%, you need to purchase insurance, so it will be a little more expensive for you.

The last thing I’ll talk about is, sometimes people are faced with the dilemma – should I save for a home or for retirement.  If I max out my RRSP each year, that doesn’t leave much extra to save for a down payment.  The government has a program available for first time buyers, where you are allowed to use up to $25K from your RRSPs to buy a home.  There are some restrictions & you do have to pay the amount back, but you can look at my website for more info:

If you’d like to know how much you can afford, or to lock in a rate, contact me, Ryan at City Wide Financial.

Ryan Zupan
Mortgage Planner