How much down payment will you require?
The amount of mortgage down payment required by a borrower depends on several factors:
- Credit scores
- GDS and TDS ( minimum down of 5% on A side, works only if the TDS and GDS are within the acceptable ratios after applying the stress test)
- Property type ( Alternate side, for example, a high rise condo may require more down payment than a single detached home.
- There is no Zero down payment anywhere in Canada.
The mortgage down payment is the amount or “equity” provided by you. This amount of equity can come from any of the sources listed below. The purchase price less your down payment is the mortgage amount you will borrow.
It is recommended a buyer determines the amount of mortgage down payment they have available, before talking to a bank or mortgage broker.
Sources of mortgage down payment:
- Own savings
- Family Gift ( must be from an immediate family member only)
- RRSP ( maximum is $25,000 tax free)
- Gifted equity from immediate family if purchasing a home from a relative
- RHOSP
- Sweat equity which is a form of ” earned ” for instance in the course of renting a home, significant value is increased by doing renovations yourself or paying someone to do it for you
- borrowed against other assets
What is the required down payment?
Insured mortgages
Require a minimum down payment of 5% of the purchase price for homes up to $500,000. For homes of more than $500,000, please check here.
Min 5% down payment mortgages are provided by mainstream lenders. These mortgages must be insured. Also, credit criteria are strict with a minimum score of 650 to 680 is required
Income needs to be fully qualified, and stress tested.
Self Employed borrowers with stated income need 10% down minimum.
Rental properties now require 25% down payment.
What if my credit is bad or Challenged?
Challenged credit borrowers or those that do not meet the new stress test will need a minimum of 20% down payment.
Summary of Down payment Requirements
| CREDIT SCORES | Down payment | Remarks |
|---|---|---|
| 680+ | 5% Minimum | * Assumes clean history last 24 months ** Must pass the new stress test for insured mortgages |
| 679-650 | 5% Minimum | * Assumes clean history last 24 months ** Must pass the new stress test for insured mortgages |
| 550-649 | 20% minimum | |
| 549-500 | 20% minimum | |
| Below 500 | 25% or more | |
| ** Assumes income is sufficient to qualify under applicable stress test | ||