Your down payment. The first step to homeownership.
You’re committed to owning your first home and you’ve been saving for a down payment. As your plan goes from dream to reality, we can help you find the best way to make use of your down payment and estimate the other costs associated with buying a home.
The amount of your down payment helps us recommend the best kind of mortgage for you. The first step is determining if you qualify for a conventional mortgage or a high-ratio mortgage (which requires you to purchase mortgage default insurance).
What’s the difference between conventional and high-ratio mortgages?
|Mortgage type||How to qualify||What it means for you|
|Conventional||You have at least 20% of the purchase price as a down payment.||You can apply for a fixed- or variable-rate mortgage without purchasing mortgage default insurance.|
|High-ratio||You have between 5% and 19.99% of the purchase price as a down payment.||Mortgage default insurance is a one-time premium you pay when your sale is finalized. You can either pay the premium all at once or add the amount to your mortgage and pay it off over time. The second option is more expensive because it adds to your interest over the life of your mortgage.|
The amount you pay depends on a few factors, like the size of your down payment and your Loan-to-Value (LTV) ratio.
The higher the LTV, the higher the insurance premium will be. We can help you calculate your cost and the best way to pay for it.
How does the Loan-to-Value (LTV) ratio work?
The Loan-to-Value Ratio (LTV) is just another way of saying, “How much of the property value has been mortgaged?” An 80% LTV means 80% of the home has been financed. In the case of a home with a selling price of $400,000 and a 5% down payment of $20,000 the Loan-to-Value ratio would be 95%.
At this LTV, the insurance premium would be approximately 4% of the $380,000 mortgage. So, you would need to budget for a one-time expense of $15,200 ($400,000 - $20,000 = $380,000 x 4%) or agree to have that amount added to the amount you borrow.
How much can you afford with your down payment?
|Purchase price||Minimum down payment|
|Less than or equal to $500,000||Minimum 20% of the entire purchase price|
|Between $500,000 and $1,000,000||5% on the first $500,000 plus 10% on the remaining balance.|
|$1,000,001 or more||Minimum 20% on the entire purchase price|
Whether you qualify for a conventional or a high-ratio mortgage, you will need to set aside enough money to cover closing costs and moving expenses. You can experiment with various home prices and buying options with our easy-to-use mortgage payment calculator.
First-time home buyers
If you’re a first-time buyer you can take advantage of government programs that help you afford a down payment. Read more about help for first-time home buyers.
There are many ways to approach buying your first home. We’re here to help you make the right choices and find the most affordable way to take ownership of your dream home.