5 Minutes of reading can save you thousands!
Downpayment: 5% vs 20%
In BC, the minimum downpayment to purchase a home is 5%. On a $500,000, that's around $25,000. A big difference than the hefty 20% ($100,000) that most people suggest putting down. Why not put 5% downpayment then? The main difference is the mortgage insurance premium that is added to your mortgage if downpayment is below 20%.
Ex: Purchase price of $500,000. Downpayment of 5%. Interest Rate of 2.99%
With CMHC insurance, you could be looking at an extra $20,000 on top of your mortgage. Although this doesn't have to be paid right away, interest will be accumulating on this amount as well.
Remember, mortgage insurance covers the lender. Not you.
To learn more about insured, insurable, and uninsurable mortgages, click here.