One of the most frequently asked questions we get asked is, “What is the minimum down payment in Canada?”. The answer is 5 percent. The down payment has to come from your own resources, all or a portion of it, can be gifted.
Now, sometimes the extension of this question is, “Well what do I have to put down in order to avoid any additional costs, in the form of default insurance premium? Well, the answer to that is 20 percent. For more information on default insurance premiums, I encourage you to watch one of the other videos in our series, on loan to value, or what is CMHC.
Let’s talk about zero down payment options, because this is a really common thing that people ask about, and there is a lot of misconception out there. Particularly, people I think need to understand that zero down options are particularly limited now in Canada. They come with a lot more restrictions, particularly prepayment restrictions, clawbacks, which means that if you ever pay the mortgage out early, you have to pay back the amount of the down payment that the bank gifted to you, or you have to pay a higher percentage rate.
So, programs that are called zero down payment, or no down payment, people have to understand is that there is an additional cost in higher interest rate, so really you are financing the amount of your down payment. Now that may work for you, and to find out more information, feel free to contact us.
Thank you for watching.