home school 101
How much do I need for a down payment?
The standard minimum down payment for all home buyers is 5% of the total purchase price.
So if you are buying a $350,000 home, you would need a minimum of $17,500.
The bigger your down payment is, the smaller your monthly mortgage payments will be.
If you do not have enough cash for a down payment, there are other options. You can talk to your bank about using your RRSPs. Or perhaps your parents can gift/loan you some money? There are also some lenders that will let you mortgage a home with $0 down.
Does my down payment need to be cash?
Nope! Cash is great, but not always necessary.
- You can use your RRSP's toward your down payment! Withdraw up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance your down payment on a home. To qualify, the RRSP funds you're using must be on deposit for at least 90 days.
- Don't have RRSP's? Ask your bank if you qualify for an RRSP loan and ask if you can use that for the down payment.
- Your family can gift or loan you some or all of the down payment.
What is the First Time Home Buyer's Incentive?
The Government of Canada is offering first tiime home buyers an incentive to purchase a home and reduce their monthly mortgage payments! Check it out!
- 5% on the purchase of a re-sale home
- up to 10% on the purchase of a new construction home
By increasing your down payment, your mortgage payment comes down!
There are many different ways this can work. Let us walk you through what one scenario looks like:
You want to purchase a $400,000 new construction home (brand new).
You have saved 5% for the Down Payment. Which means you have $20,000.
The Government of Canada will lend you an additional 10% - which is an
This brings your total payment to $60,000.
So guess what that does to your monthly mortgage payment? It drops it down over $200 per month - from $1848 to $1634!*
All you have to do is apply. It's easy! We can help you with the paperwork and connect you with bankers who know all about this program.
For more information,
*Mortgage payments calculated on RateHub: Interest rate 2.89%, 5 year term, 25 year ammortiziation period.
How does Repayment work for the First Time Home Buyer's Incentive?
It really is a fantastic way to help you buy your first home. But there are some basic rules. Here's the fine print:
1. The program is as of effective September 2/2019. Purchase contracts must be completed after this date to qualify.
2. If you find a place you want to buy, the possession date must be November 1/2019 or later.
3. Who qualifies? In Alberta, the maximum qualifying income is $120,000 per year. That is a combined income of whomever you are purchasing the home with.
4. What kind of homes qualify? New and used single family houses, duplexes, multifamily townhomes, condos and manufactured homes.
5. Is there a maximum? Yes! The total borrowing amount is limited to 4X the qualifying income up to a maximum of $480,000. The combined mortgage and Incentive amount cannot exceed four times the total qualifying income.
So if your qualifying income is $90,000 per year, the max you can borrow for a home is $360,000.
6. When does the Government of Canada get paid back? The buyer will be required to repay the Incentive amount after 25 years, when the property is sold or when you re-finance the property; whichever comes first. You can also repay the incentive amount in full at any time without penalty.
7. How is repayment calculated? If a home buyer receives a 5% (or 10%) incentive, the buyer will repay 5% (or 10%) of the home's fair market value at repayment.
For more details, visit
How do I DOUBLE my down payment?
Sound too good to be true? It's not. By using the First Time Home Buyer, you can get up to 10% extra added to your down payment. Here's how this works:
Let's say you want to purchase a $400,000 new construction home (brand new).
You have saved 10% for the Down Payment. Which means you have $40,000.
The Government of Canada will lend you an additional 10% - which is an extra
This brings your total payment to $80,000.
So guess what that does to your monthly mortgage payment? It drops it down $240 per month - from $1736 to $1496!*
All you have to do is apply. We can help you with the paperwork.
Want to see for yourself what the Gov't of Canada Incentive program works and how repayment works?
*Monthly payments calcula
ted using 2.89% interest rate on a 5 year term for 25 year ammortization period.
How do I buy a home with $0 down payment?
Don't have enough cash or RRSPs saved for the down payment on a home? It's OK. Some banks may loan you the money needed for your 5% down payment.
What is Mortgage Loan Insurance? (often called "CMHC fee")
If you want to buy a home with a down payment of less than 20%, you’ll need mortgage loan insurance. This protects your lender (bank) in case you don't make your mortgage payments.
What is it? It is mortgage default insurance. It is there to protect the lender if you default in your loan (stop making the payments). The bank purchases the insurance and passes the fees onto you along with your mortgage payment.
A common name for this insurance is the "CMHC Fee" (Canada Mortgage and Housing Corporation). There are also private insurance providers like
Genworth Canada and
Canada Guaranty that offer this same insurance product.
Mortgage loan insurance allows you get a mortgage for up to 95% of the purchase price of a home. It also ensures you get a reasonable interest rate, even with your smaller down payment.
To get mortgage loan insurance, you’ll need a minimum down payment. The amount depends on the home’s purchase price:
- If the home costs <$500,000, you’ll need a minimum down payment of 5%.
- If the home costs >$500,000, you’ll need a minimum of 5% down on the first
$500,000 and 10% on the remainder.
- If the home costs >$1,000,000, mortgage loan insurance is not available.
Your lender pays an insurance premium on mortgage loan insurance and passes that fee onto you. It’s calculated as a percentage of the mortgage and is based on the size of your down payment.
You can pay it in a lump sum or add it to your mortgage and include it in your payments.
To see how much you mortgage loan insurance will affect your monthly payments go the CMHC Fee calculator
If I use the First Time Buyer Incentive does that mean the government owns part of my house?
Technically, yes. The Incentive is a second mortgage on the Title of the property. The bank will have the first mortgage on title. This means that the Incentive will need to get paid back when either the property is sold or after 25 years.
The Incentive is NOT interest bearing. But the Government of Canada does share in the upside and the downside of the property value upon repayment.
For all the details,
What the heck is the "Stress Test"?
Introduced in 2017, the Stress Test is a more stringent set of rules banks must now use to determine if you qualify for mortgage.
When you apply for a mortgage, the lowest rate the bank can use to determine your eligibility is the posted
Bank of Canada 5 year rate, plus 2%.
In simple terms, if you wanted to borrow $400,000 and the Bank of Canada's posted rate is 3.95%, you would have to prove you can afford a mortgage payment of about $2,547 per month (at 3.95% + 2.0% = 5.95%), even though your
actual monthly mortgage payment at the bank's interest rate would likely be just under $2,000.
Click here to learn more.
How do banks decide if you qualify for a mortgage?
In general, to figure out how much of a mortgage you qualify for, a lender will use some basic tools to calculate how much money you earn, what are your assets worth and how much debt you are capable of paying. Your mortgage, car payment, student loans, credit card payments etc. are all considered your debt. The bank may also take into account the other bills associated with having a home: utilities, property tax, condo fees, insurance.
The bank will start by determining your "Debt Service Ratio". It is basically a measurement to see if you have enough cash flow to pay your debt.
Want to figure out your
Debt Service Ratio?
Most banks will say that maximum threshold for debt service ratios are:
For more infromation about getting pre-qualified for a mortgage,