How Much for a Down Payment on a House in Ontario 2024?

Despite a 3.7% decrease in the average price of residential homes sold across Ontario compared to last year, the figure still stood at a substantial $890,634 in May 2024. Clearly, buying a property requires a significant amount of money. While most of this can be covered by a mortgage—a special loan designed to help people purchase homes—it’s not as simple as just applying for a mortgage and getting the house you want.

To secure a mortgage, you need to provide a down payment. The required amount for Ontario residents can vary based on the property’s value, your income, and the lender. This article will guide you through determining how much you need to save for a down payment.

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  1. The Thresholds for Down Payments in Canada

As a general rule, the higher the down payment, the better. Paying more upfront can often secure better deals on your mortgage. However, a down payment is always required, no matter what.

The minimum amount you need to put down depends largely on the value of the home you want to buy and the size of the mortgage you need.

There are three basic thresholds to consider for down payments:

  1. Homes under $500,000: You need to provide a minimum of 5% as a down payment. For example, for a home worth $350,000, you would need to pay at least $17,500 (calculated as $350,000 multiplied by 0.05).
  2. Homes between $500,000 and $999,999: This requires a bit more calculation. You need 5% for the first $500,000 and 10% for any amount above that. For a home worth $700,000:
    1. 5% of $500,000 is $25,000.
    2. 10% of the remaining $200,000 is $20,000.
    3. Adding these together, you would need a total down payment of $45,000.
  3. Homes $1 million and above: A down payment of 20% is required. For example, for a home worth $1.4 million, you would need a down payment of $280,000 (calculated as $1,400,000 multiplied by 0.2).
  1. How Much is Mortgage Insurance for Ontario?

If your down payment is less than 20% of the property’s price, you will typically need to obtain mortgage loan insurance. This insurance protects your lender if you are unable to make your payments. In some cases, your lender may require this insurance even if your down payment is 20% or more.

The cost of mortgage loan insurance, or the premium, varies based on the size of your down payment. Generally, the larger your down payment, the lower your mortgage insurance premiums. Let’s look at an example:

  • Down payment below 10%: You need to pay an additional 4% for your premium. For a $350,000 home with a $17,500 down payment, your mortgage would be $332,500. The premium would be $13,300 (calculated as $332,500 multiplied by 0.04).

  • Down payment between 10% and 14.99%: You will pay a 3.1% premium on the mortgage. For a $350,000 home with a 10% down payment ($35,000), your mortgage would be $315,000. The premium would be $9,765 (calculated as $315,000 multiplied by 0.031).

  • Down payment between 15% and 19.99%: You will pay a 2.8% premium. For a $350,000 home with a 15% down payment ($52,500), your mortgage would be $297,500. The premium would be $8,330 (calculated as $297,500 multiplied by 0.028).

You can pay your premium in two ways: adding it to your mortgage and paying it over time (which will accrue interest), or paying it as a lump sum. In Ontario, you must also pay provincial sales tax on your mortgage insurance premiums. The current rate is 8%. Read our article about all the closing costs of buying a house in Toronto to be aware of all the associated costs.

  1. How Much Can I Borrow Against My House in Canada?

When you borrow money against a house that already has a mortgage, it’s called a second mortgage. If you can’t make the payments, the lender can foreclose on the property. Foreclosure means the lender takes ownership of the property and sells it to recover the money you owe.

You can usually borrow up to 80% of your property’s value, minus what you still owe on your first mortgage. Like any loan, you’ll have to pay interest until it’s paid off.

To get a second mortgage, you need a good credit score and enough income to show you can repay the loan.

  1. What is the Minimum Down Payment for a House in Canada?

  1. Paying as much as you can for a down payment is the best option, as it will give you better mortgage deals and help you pay off your mortgage more quickly.

    However, the absolute minimum down payment you can pay is 5% of the value of the home. This requirement changes as the home value increases. For homes valued over $500,000, the minimum down payment will be a larger percentage.

  1. Interested in down payments and purchasing a home? Call or email me today to discuss your goals and the current options available to you.

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