How much money do I need for a down payment?
Lenders look at a variety of factors including time on the job (or in business) and credit rating. It’s possible to purchase a home with as little as 5% down. The new programs offered by the government may contribute another 5-10%, which is considered borrower equity by lenders. A down payment of less than 35% requires mortgage insurance from CMHC or a private insurer. If you have more than 35% of the purchase price coming from your own funds, then the insurance is waived.
Tell me more about mortgage insurance
Mortgage insurance is offered by Canada Housing and Mortgage Corporation, which is a government funded entity with a mandate to insure low-down payment mortgages against default. This makes a high ratio mortgage more attractive to lenders if they are certain it will be repaid by you or an insurance policy in case of a foreclosure. Private companies offer insurance at generally the same rate but with guidelines that are sometimes more flexible compared to CMHC.
What are some factors that affect the mortgage rate?
Some lenders will advertise a very low rate with a disclaimer. The best possible rates require a high credit rating and a high down payment, usually 35% or more. If have 5% down and an average credit rating, lenders may offer a slightly higher rate.