How much of a down payment do we need to purchase a home? I am frequently asked this question as a Grimsby Mortgage Broker, often by people who have pre-conceived notions either from the internet, friends and family, or late-night real estate shows.
Typically, you require a minimum 5% down payment, however, due to changes implemented by the federal government, the 5% is only applicable towards the first $500,000 of a purchase. For amounts exceeding $500,000 and up to $999,999, a 10% down payment is required.
As an example, if you are purchasing an $800,000 property, you would require $25,000 for the first $500,000 and $30,000 for the remaining $300,000, for a total down payment of $55,000.
For purchases of $1,000,000 and higher, you require a minimum down payment of 20% of the full purchase price.
The source of the down payment can be from savings or from monies gifted from an immediate relative. Further details on downpayment requirements and programs can be found here.
Transaction History Requirement:
Typically, you need to provide a three-month transaction history that shows the accumulation of savings in the account or accounts that your down payment is coming from. Any transactions, typically over $1,000, have to be explained, confirming where the transaction came from and an additional three-month transaction history from the account that the transaction originated from.
As an example, if the transaction history for your savings account shows a $3,000 deposit which came from your chequing account, you would have to provide a transaction history from the date of the deposit going back three months from the chequing account. As you can imagine if you are transferring funds between accounts or making large cash deposits this complicates the process for yourself and your Grimsby Mortgage Broker.
Additional Considerations for the Downpayment:
One often forgotten item is that in addition to a down payment, you are also required to verify that you have 1.5% of the purchase price available to cover typical closing costs. Like the down payment, you have to show a three-month transaction history of the account it is housed in. If it is coming from the same account as the down payment and you have sufficient funds then it is easy.
As part of the pre-qualification process offered through our free consultation, Canadian Mortgage Authority can help you identify exactly how much of a down payment is required. Additionally, if you enroll in our Road to Home Ownership Program, we can show you how to build a down payment!