Mortgage Rate Forecast in Canada: Where Will Rates Go?
Updated semi-monthly on the 1st weekday of the month and the first weekday on or after the 15th. Last Updated on: Jan 13, 2024. Table
mbrowne
12 January 2025
What is the minimum down payment I can make in Canada?
- If the purchase price is less than $500,000, the minimum down payment is 5%.
- If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000.
- If the purchase price is $1,000,000 or more, the minimum down payment is 20%. Also if it is higher than $1,000,000, some lenders have a “sliding scale”. One lender we work with can do 80% financing on the first 1.5mil and 65% on the remainder
- If the purchase is a rental property you need at least 20% down payment
Case Study #1 - Buying a $500,000 house requires a minimum of $25,000
Case Study #2 - Buying a $750,000 house requires a minimum of $50,000
Case Study #3 - Buying a $1,100,000 house requires a minimum of $220,000
Case Study #4 - Buying a $1,750,000 house (sample lender) could need a minimum of $462,500
How does my down payment affect my mortgage?
The amount of mortgage you can get – with more down payment you can get better mortgage terms and borrow a larger amount
Here are the 2 main types of mortgages you can get:
Insured Mortgages
- If you purchase a house using less than 20% down payment you would be getting an insured mortgage. It is insured by one of the three insurers in Canada (CMHC, Canada Guaranty, Sagen)
- Lower interest rate
- Higher monthly payments
- Insurance premium
Convensional Mortgages
- A conventional mortgage is just that – a regular mortgage. There is no insurance. Generally this is the mortgage you would get when you put 20% down payment.
- Slightly higher interest rate
- Easier to qualify for
- Lower monthly payments
- No insurance premium
What does the bank need to see for down payment?
Most lenders need to see at least 3 months of history of your down payment. Unfortunately, this means any of the accounts that hold cash for the down payment.
What the lender is looking at is the movement of money. It’s a regulatory requirement to ensure there is no money laundering or mortgage fraud.
Frequently asked questions
Does the deposit form a part of my down payment?
Yes, the deposit you make is a portion of the cash you need to purchase the property.
What is a high ratio mortgage?
A high ratio mortgage is a mortgage that uses less than 20% of the purchase price for cash down. This type of mortgage needs to have mortgage insurance.
What is a conventional mortgage?
A conventional mortgage is a mortgage that uses 20% or more of the purchase price for down payment. This type of mortgage does not need a mortgage insurance
What is mortgage insurance?
Mortgage insurance is insurance for the lender. It protects them if the borrower defaults or doesn’t pay their mortgage. This allows lenders to give riskier mortgages (less down payment and lower rates).
For more, here is one of the insurer’s posts about how their insurance works:
Can I use money gifted from my family as part of my down payment?
When buying a house for you to live in, you can borrow down payment from your parents. In some cases the lenders may make an exception for other family members.
Can I use money in my RRSP for cash down?
If you are a First Time Home Buyer* you can use up to $35,000 per qualifying person for down payment on your purchase.
** First Time Home Buyer is defined by the Government of Canada. Their site goes over all of the details that you need to know:
Can I use an unsecured line to buy my home?
Some lenders allow you to use an unsecured line of credit for a portion of your down payment. These are called Flex-down mortgages.
Can I use a home equity line of credit To Buy My Home?
Yes, many lenders will let you use your home equity for down payment. In fact, many real estate investors will use their home equity line of credit as down payment.
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mbrowne
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