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You can get a mortgage in Canada today with as little as 5% down or no savings for a down payment through a flex down mortgage. However, if thinking of putting more down, it is important to know the reasons to put 20% or more as a down payment.
Saving for a down payment can be tough. Especially when wanting to have a down payment of 20% or more. However if you’re looking to do a larger down payment, here are the top five reasons why you should have a 20% down.
By having a 20% down payment you now automatically have equity built into your home. This can protect you against a downturn in the real estate market. Also, if you need to sell quickly, if financial or health challenges arose and you didn’t have a back up plan, you would be more protected.
By putting down 20% the result will be smaller mortgage needed. This will save you interest when compared to putting down less than 20%.
One of the most exciting reasons to put down 20% is to save on the mortgage insurer (i.e. CMHC) premium. In Canada when you have less than 20% then mortgage insurance is required. The premium for this insurance is as high as 4% of your mortgage balance plus tax paid on closing, which can certainly add up.
By having a smaller mortgage as well as not having the mortgage insurer premium added to your mortgage, your payment will be smaller when compared to putting less than 20% down.
As just mentioned, by putting 20% versus a smaller down payment, your payment is then smaller. This improves your debt to income ratio which can help you qualify for a mortgage or potentially qualify for a bigger mortgage and therefore a bigger home.
Andrew Thake is a seasoned mortgage broker with over 15 years of industry experience. He’s assisted more than 2,200 clients in finding their ideal mortgage solutions. Recognized for his excellence, Andrew has received high honours and awards, including the National Rookie of the Year from TD Canada Trust and recognition as a Top 10 Ottawa Mortgage Broker in 2023. He has also been inducted into the Hall of Fame at Dominion Lending Centres and has consistently received their Platinum Award during his tenure as a mortgage broker.
Andrew’s dedication lies in serving his clients and prioritizing their needs with an empathetic approach. Throughout the application process, he provides tailored, informed, and efficient services to ensure the best mortgage solutions for his client’s unique circumstances. The best part of Andrew’s job is when he gets to see the joy on his clients’ faces following their mortgage approval.
