What is the Minimum Down Payment for a House?
The absolute minimum down payment required when buying a house in Ontario and the rest of Canada is 5%. But that comes with some limitations.
5% Minimum Down Payment: Limitation #1
First of all, the 5% minimum down payment only applies for home purchases up to $500k. If you purchase a home between $500k and $1M, you have to put down 10% for any amount above $500k.
So if you wanted to buy a $900k home, you’d have to put down 5% (i.e. $25k) for the first $500k and 10% (i.e. $40k) for the remaining $400k.
That’s a total minimum down payment of $65k for a $900k home. That comes out to 7.2% down.
If you want to buy a home worth $1M or more, you have to put 20% down.
5% Minimum Down Payment: Limitation #2
Secondly, you’d still have to qualify for the mortgage.
If you did put $65k down on a $900k home, that translates to a mortgage of about $868k (after you factor in the required mortgage insurance).
At an interest rate of 2.5% and a 25 year amortization period, that would equate to about a monthly mortgage of $3890.
So the two remaining questions are:
- Do you qualify for a $868k mortgage? (see my article “What are GDS and TDS? Answered with Examples”)
- Can you afford to pay $3890/month for mortgage payments? (see my article “How Much Mortgage Can I Afford?”)
5% Minimum Down Payment: The Reality
So when someone says that you can you put 5% down when purchasing a house, is it true?
Yes, in theory. But not necessarily in practice as it depends on where you want to live. You likely won’t be able to do it if you’re looking for a home somewhere expensive like the Greater Toronto Area (GTA).
According to real estate numbers just reported for March 2022, the average home in the GTA was around $1.3M. So, in reality, it will be difficult to even find a property in the GTA that would allow you to put 5% down.
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