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: https://ZupanMortgage.com/first-time-buyers/tax-incentives
If you’d like to know how much you can afford, or to lock in a rate, contact me, Ryan at City Wide Financial.