A Guide to Buying Real Estate in Alberta, Part 5: Down Payment
Mortgages and down payments in Canada used to be very simple: there were about 6 different mortgages to choose from, and a clear "minimum" when it came to down payments. Today, there are hundreds of mortgages to choose from and a down payment may not even be required.
If you put less than 20% down on the purchase of a home, mortgage insurance will be required. The good thing is the mortgage insurance is just tacked on to your mortgage, the bad thing is you might not even notice that it is there!
As you learned in Part 4 of this series, any deposit you make on the home you purchase counts towards your down payment.
How much does mortgage insurance cost?
Mortgage Loan Insurance is calculated as a percentage of the loan, and is based on the size of your down payment. The lower your down payment, the higher percentage you will pay in insurance premiums. There are a number of mortgage insurers in Canada, and the list is growing. The two I am most familiar with are CMHC (Canada mortgage and housing corporation) and Genworth Financial. As of the posting of this article, mortgage insurance is calculated as follows (source: CMHC):
Table of CMHC Mortgage Loan Insurance Premiums | |
| Loan Size (% of Lending Value) | Single Advance Premium (% of Loan) |
| Up to and including 65% | 0.50% |
| Up to and including 75% | 0.65% |
| Up to and including 80% | 1.00% |
| Up to and including 85% | 1.75% |
| Up to and including 90% | 2.00 |
| Up to and including 95% | 2.75% 2.90% |
| Up to and including 100% | 3.10% |
When is the down payment required?
A few days before you take possession of your new home you will meet with your lawyer to sign a number of documents. At this time you will also be required to provide the down payment on the home, as well as any other outstanding fees, such as your lawyer's fees, and any taxes the seller may have prepaid.
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The financial crisis has not abated. The sad part is that it seems we will all pay, through government bailouts, for the spending binge of the consumers and the greed of the lenders. See the following article:
http://www.bloomberg.com/apps/news?pid=20601109&sid=arcwG_0LM0lM&refer=exclusive
The one thing the article mention is increased controls so the next crisis does not happen. In Canada though the lowering of the required down payment on RE property to 0% and allowing mortgages with more than 25 years of amortization does not indicate anything helpful. Will we see some reversal in these decisions?
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Posted by: BAD | February 04, 2008 at 10:53 AM
BAD, I do believe that's considered spam. People can get a RSS feed or watch news.google if they want to read every article out there on the credit crunch.
Posted by: Nate | February 04, 2008 at 02:37 PM
I got a mortgage with an abnormally long amortization period (40yrs) and had to pay a slight premium on the premiums. I assume your figures are for the standard amortization period.
Posted by: Derek | February 04, 2008 at 02:47 PM
Derek:
"I assume your figures are for the standard amortization period."
Ya, those posted premiums are for standard 25 year amortized mortgages. There's higher premiums for longer amortizations (i.e. 30, 35, 40 yr mortgages). There also higher premiums for self-employed individuals, refinances, investments, etc. Best to check with your lender exactly what your premiums will be based on your situation.
Posted by: RealtorJ | February 04, 2008 at 05:06 PM