The minimum deposit to purchase a house

Dated: 12/06/2018

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There is a lot of different ideas of what the minimum deposit is when purchasing a house. After speaking with a number of house buyers I have heard them say a number anywhere from 5%, 10%, 20%, 30%, 35%.  The short answer is it depends.

The minimum down payment requirement depends on the purchase price of the home. For a purchase price of $500,000 or less, the minimum down payment is 5%. When the purchase price is above $500,000, the minimum down payment is 5% for the first $500,000 and 10% for the remaining portion. 
 
Here’s is the math:
A. Purchase price: $500,000
    Minimum deposit: 500,000 x 5% = $25,000
B.  Purchase price: $600,000 
      Minimum deposit: 500,000 x 5% = $25,000
      100,000 x 10% = $10,000
      Total deposit: 25,000 + 10,000 = $35,000
If you are purchasing a house over $1,000,000 or more your minimum deposit will be 20% of the amount. For a $1,000,000 purchase your minimum deposit is $200,000. 

Why 20%? Mortgage amounts over $1,000,000 are NOT eligible for mortgage loan insurance. 
Mortgage lenders are able to offer down payment options under 20% because their risk is virtually eliminated by the mortgage loan insurance. 

Mortgage loan insurance protects the mortgage lender in case you’re not able to make your mortgage payments. It doesn't protect you. Mortgage loan insurance is also sometimes called mortgage default insurance.

The mortgage insurance providers available in Canada are Canada Mortgage and Housing Corporation (CMHC), Canada Guarantee and Genworth.
Note that your minimum deposit amount may vary based on your financial situation such as your income, credit, if you are self-employed and if you are a foreign buyer.  
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