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.