Many people looking at purchasing property in Canada, especially young or new homeowners, are intimidated by the idea of putting down 20 per cent of the purchase price. It’s definitely a large chunk of cash to offer up front, so it’s no wonder. While some people do manage to purchase a home using a smaller down payment, there is definitely a lot to be said for putting down as much as you can. Here’s why:
Your monthly costs will be lower. The more money you can unload upfront, the less you’ll be paying every month, and this can really add up when it comes to evaluating your monthly expenses.
You’ll pay less in interest. The longer you’re stuck paying off your home, the more interest you’ll accrue. Since interest rates often rise over time, this is definitely something you want to avoid.
You might not have to pay mortgage insurance. Thanks to 2018’s Canadian mortgage changes, even those paying 20 per cent for a down payment will have to undergo a “stress test” to see if their finances could stand up to an increase in interest rates. However, if you’re paying less than 20 per cent, you’ll be on the hook for something called mortgage insurance, which will also add to your monthly costs.
Not sure what the best strategy is for you and your family’s home-buying needs? Talk to your agent to see how you can maximize your purchasing power.