Mortgages

Minimum down payment

A down payment is the amount of money that you put towards the purchase of a home. The down payment is deducted from the purchase price of your home. Your mortgage loan will cover the rest of the price of the home.

The minimum amount you'll need for your down payment depends on the purchase price of the home you'd like to buy.

 
Purchase price of your homeMinimum amount of down payment
$500,000 or less
  • 5% of the purchase price
$500,000 to $999,999
  • 5% of the first $500,000 of the purchase price
  • 10% for the portion of the purchase price above $500,000
$1 million or more
  • 20% of the purchase price

If you're self-employed or have a poor credit history, you may be required to provide a larger down payment.

Normally, the minimum down payment must come from your own funds. It's better to save for a down payment and minimize your debts.

How to calculate your minimum down payment

If the purchase price of your home is $500,000 or less

Suppose the purchase price of your home is $400,000. You’ll need a minimum down payment of 5% of the purchase price. The purchase price multiplied by 5%, for a total of $20,000.

If the purchase price of your home is more than $500,000

Suppose the purchase price of your home is $600,000. Your minimum down payment will be 5% on the first $500,000, for a total of $25,000. On the remaining $100,000, your minimum down payment will be 10%, for a total of $10,000. Add both totals together and your minimum down payment would be $35,000.

Home Buyers’ Plan (HBP)

To help you come up with a down payment, you may be eligible for the Home Buyers’ Plan (HBP). The Home Buyer’s Plan allows you to withdraw up to $25,000, tax-free, from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home. You have up to 15 years to repay the amounts you withdrew.

Before you sign up for the Home Buyers' Plan, consider:

  • if you'll be able to make the repayments
  • will withdrawing funds impact your retirement savings

Keep in mind:

  • Not making the repayments could end up costing you a lot of money in income tax
  • Even though you'll eventually repay the funds, you may still lose out on any growth while the funds are withdrawn

Find out if you’re eligible and how to participate in the Home Buyer’s Plan.

Mortgage loan insurance

Mortgage loan insurance protects the mortgage lender in case you’re not able to make your mortgage payments. It doesn't protect you. Mortgage loan insurance is also sometimes called mortgage default insurance.

If your down payment is less than 20% of the price of your home, you’ll need to purchase mortgage loan insurance.

If you’re self-employed or have a poor credit history, you may also be required to get mortgage loan insurance, even if you have a 20% down payment.

Mortgage loan insurance isn't available, if:

  • the purchase price of the home is $1 million or more
  • the loan does not meet the mortgage insurance company’s standards

Your lender will coordinate getting mortgage loan insurance on your behalf if you need it.

Cost of mortgage loan insurance

A premium is a fee you pay to get mortgage loan insurance.

Mortgage loan insurance premiums range from 0.6% to 4.50% of the amount of your mortgage. Your premium will depend on the amount of your down payment. The bigger your down payment, the less you’ll pay in mortgage loan insurance premiums.

Find premiums based on the amount of your mortgage loan:

To pay your premium, you can either add them to your mortgage loan or pay them with a lump sum up front. If you add your premium to your mortgage loan, you'll be paying interest on your premium at the same interest rate you're paying for your mortgage.

Ontario, Manitoba and Quebec apply provincial sales tax to mortgage loan insurance premiums. Provincial taxes on premiums can’t be added to your mortgage loan. You must pay these taxes when your lender funds your mortgage.

 

BC Home Owner Grant

Reduces property taxes by up to $570 on properties assessed up to $950,000 and continues on a sliding scale up to $1,064,000. Provides an additional $275 for a maximum of $845 for seniors, veterans and the disabled on homes assessed up to $950,000, and is reduced on a sliding scale on homes valued up to $1,119,000.

Property Transfer Tax

Home buyers in BC pay a provincial Property Transfer Tax when they buy a home. The tax is charged at a rate of 1 per cent on the first $200,000 of the purchase price and 2 per cent on the remainder. First time home buyers may qualify for an exemption on home with a maximum purchase price of $425,000 or a partial exemption on a home priced to $450,000. Buyers can't have previously owned a home anywhere in the world, and the down payment cannot exceed 30 per cent of the purchase price.

Home Buyers Plan (RRSP's for your Down Payment)

The federal government's home buyer's plan now let's qualifying homebuyers use up to $25,000 (increased from $20,000) of their RRSP to buy a home. Couples can use up to $50,000 (increased from $40,000). The home must be a principal residence, the home buyers must not have owned a home within the past five years, and the loan must be repaid within 15 years. More information be directed to the Canada Revenue Agency at: 1.800.959.8281.

First Time Home Buyers Tax Credit

This new federal tax credit program provides up $750 in tax relief to qualifying buyers for costs associated with buying a first home, including legal fees and land transfer taxes. Beginning on your 2009 personal income tax return, a new line will be incorporated to allow you to claim the credit.

Home Renovation Tax Credit

This new provision lets homeowners qualify for a federal income tax credit of up to $1,350 for home improvement projects. This temporary program provides an income tax credit on eligible home renovation expenses for work performed or goods bought after January 27, 2009 and before February 1, 2010. Home owners can claim a tax credit for 15 per cent of the renovation expenses between $1,000 and $10,000 for a maximum credit of $1,350. There is no tax credit for less than $1,000. New additions, decks, carpeting, floorings, heating systems and landscaping qualify. Furniture, appliances, tools and maintenance contracts do not qualify. Note: there are no forms. Beginning with the 2009 personal income tax return, a new line will be incorporated to allow renovators to claim the credit. If you intend to use this tax credit, be sure to save your invoices and receipts.

BC Home Renovation TaxOwner Mortgage and Equity Partnership Program

Under the BC Home Owner Mortgage and Equity Partnership Program, the BC government will match the down payment funds of eligible first time buyers for up to five per cent of the purchase price, up to a maximum of $37,500, which will be registered as a second mortgage for a term of up to 25 years.
 
“This is a necessary program which will assist many first time home buyers to enter the housing market at a time when housing affordability is a serious challenge. This program will provide tangible, necessary assistance which will facilitate the purchase of first homes for many BC residents struggling to save sufficient funds for a property down payment,” Gale told Mortgage Broker News. “There are many potential buyers in BC who simply cannot afford to buy a home because they do not have the necessary down payment saved, despite having sufficient income to qualify for their mortgage payments.”
 
For the first five years of the second mortgage, there are no payments due of either principal or interest. The payments begin in the sixth year of the second mortgage and is amortized over the remaining 20 years with an interest rate that is set at the same time the first year the mortgage is registered. The interest rate will be .5 per cent more than the current RBC 5-year rate and then reset at years 10, 15, and 20. Homeowners may repay the second mortgage in full or in part at any time without penalty.