The standard purchase-price tiers
For a $400,000 home, 5% is $20,000. For a $600,000 home, the calculation is $25,000 on the first $500,000 plus $10,000 on the remaining $100,000, for a $35,000 minimum.
- Below $500,000: 5% of the purchase price
- $500,000 to below $1.5 million: 5% of the first $500,000 plus 10% of the remainder
- $1.5 million or more: generally 20%
What mortgage loan insurance does
A down payment below 20% usually creates a high-ratio mortgage that requires mortgage loan insurance. The insurance protects the lender if the borrower defaults; it is not home insurance and does not replace disability or life insurance. The premium can increase the mortgage balance.
- It protects the lender, not the buyer
- The premium depends partly on loan-to-value
- Provincial sales tax treatment can vary
Do not spend every saved dollar on the down payment
Keep a separate allowance for closing costs and an emergency buffer. A larger down payment can reduce the mortgage, but using all available cash can leave a buyer unable to cover legal fees, adjustments, moving costs or immediate repairs.
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