How Much Do You Need for a Home Down Payment in Ontario?
The real estate market for homes in Ontario continues to grow without an end in sight. In October, the average sale price in Toronto rose another 20% from the same time last year. However, with the average price over $1.1 million, a home down payment seems out of reach.
Yet, there are alternative regions where homes in Ontario are more affordable. So, if you are looking at buying a home in the Niagara Region, keep reading.
This guide will tell you what you need to know for a minimum down payment.
What Is A Down Payment?
It’s important not to confuse a down payment with a deposit on a house.
The simple rule is, a deposit can be a portion or sum of money that goes towards a down payment on your home in Ontario but may not necessarily be the down payment required to secure the home.
In other words, a deposit will secure a sale agreement until financing for the home is complete.
Yet, once you secure the final sale, you will need to ensure a mortgage for the rest of the funds.
Visit the national housing and mortgage service to access a mortgage payments calculator, but first, you will want to have at least the minimum down payment required by law.
Requirements for a Home Down Payment in Ontario
First, any down payment of less than 20% of the home’s price must have mortgage insurance.
Also, your financial status may affect the minimum down payment you will need to pay.
For example, self-employed individuals may have to increase their down payment. People with poor credit records may also have difficulty getting a mortgage. Yet, there are high-risk lenders who will accept a lower down payment.
The Government of Canada has created an incentive program for new buyers in the market. First-time homebuyers can receive a one-time, interest-free loan for a home down payment. The incentive is repayable within 25 years, either as an early settlement or when the home gets sold again.
The calculation for a minimum down payment depends on the price of the home. For example, a home that sells for $500,000 or less requires a 5% down payment. So a $500,000 home needs a minimum $25,000 down payment.
A house valued between $500,000 and $1 million will need 10% on the amount over the first half million. If the house sells for $700,000, the down payment will be $25,000 plus another $20,000 for the amount over $500,000.
Therefore, you will need to put down $45,000 on a $700,000 home.
All homes in Ontario over $1 million will need a minimum down payment of 20% of the purchase price, but if you are buying a home in the Niagara Region, you are less likely to need 20% because of lower prices.
Looking to Purchase a Home in Ontario?
Finding affordable homes in Ontario can be a stressful exercise. Yet, buying a home in the Niagara Region is still within reach. Many buyers look at these homes in Ontario as a significant part of their future. If you have a home down payment that meets the requirements, come over and take a look. Check out our buyers guide to help you find the home of your dreams or call for a free consultation with one of our experts.
