Do I Have to Provide a 20% Down Payment?

By: Joshua Campbell

Do I Have to Provide a 20% Down Payment?

Tags: Real Estate, real estate advice, down payment, real estate tips, home prices, knowledge broker, knowledgebrkr, blogging, Newmarket, York Region,

2 minute read. 

Many financial experts recommend that when purchasing a home, you provide at least 20% of the home’s purchase price. This is used as your down payment. For many buyers, this can be a challenge. It can take years to save for a down payment and homeownership may seem unachievable. 

Providing a large down payment on your home has many benefits. A few advantages of providing a minimum of 20% include:
Unfortunately, there are some drawbacks as well. For example, providing a 20% down payment can take longer to save. It can also impact your ability to save up for other financial goals such as your children’s education, retirement, etc.

Do I Have to Provide a 20% Down Payment?

No, you do not always have to provide a down payment of 20% when you purchase a home. In Canada, the minimum requirement is 5% of the home’s purchase price. If you choose to provide a down payment between 5% and 19.99%, you will be required to pay mortgage insurance.
Mortgage insurance is designed to protect lenders in case you cannot make payments on your home and you default on the home loan. The premium you pay will vary depending on the size of the down payment you provide. This means that if you provide only 5% of the home’s purchase price as a down payment, you can expect to pay a higher premium each month.
By choosing to pay the premium, homeownership becomes more of a reality for many buyers. It is easy to pay off as it is often included in the monthly mortgage payment or it can be paid upfront. Unfortunately, there are also many drawbacks including increasing your monthly mortgage payment. The only way to decrease this payment is to increase your down payment.
Before beginning your house hunt, determine if you are willing to pay the mortgage insurance premium. Or continue saving for the 20% down payment on your new home. Both are options I’d be happy to discuss with you in more detail.

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JOSHUA CAMPBELL (@knowledgebrkr)
Real Estate Broker
Coldwell Banker The Real Estate Centre, Brokerage
249 Avenue Road • Newmarket, ON L3Y 1N8




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