Buying your first home in Canada is not to be taken lightly. You will need to make sure that you have done your research and that you can afford the payments on your mortgage. Buying a home is expensive. Rarely does a person actually have enough money to buy one outright. This is where lenders come in, giving you the chance to take out a loan that will be secured by the value of your home. That’s known as a mortgage. Let’s take a dive into what a mortgage is, the different types available to you and how you service one over its lifetime to eventually fully own your home.
What is a mortgage?
A mortgage is a loan that is backed by real property. It is provided by a lender, and will be bound by terms (which include the interest charged on the mortgage). When you qualify for a mortgage, you will be given a specific amount of time by your lender to pay it off. Failure to make payments can result in the bank taking over your home as collateral against your failure to repay your loan.
What is a down payment?
Essentially, a down payment is the portion you put down towards the value of your home right up front. This payment is then supplemented by the amount someone is approved for with a mortgage.
What’s the minimum down payment rule in Canada?
In Canada, the minimum down payment someone must be able to make is calculated as a percentage of the home’s purchase price. Depending on how much that house costs, the minimum down payment amounts vary.
For the portion of a home’s purchase price below $500,000, the minimum down payment is 5%.
For the portion of a home’s purchase price from $500,000 to $999,999, the minimum down payment is 10%.
For homes valued $1 million or more, the minimum down payment must be 20%.
Do I need a real estate agent?
As a first time home buyer, yes, you probably do. Purchasing your first home is no simple task, and it’s in your best interest to have an expert in your corner who can help you every step of the way. Not only will they have exclusive access to listings you likely wouldn’t be able to find yourself, but they’ll also have the knowledge and expertise to help you navigate what will likely be the biggest and most complex purchase you ever make.
The right agent will have a wealth of knowledge about the current market, be a skilled negotiator and will ensure they’re finding you the best property to meet your needs. They’ll be there to provide an objective opinion when you need it, and ultimately will be able to make the process a lot less stressful for you.
