(778) 668-9320 scott.dawson@verico.ca

This weeks Mortgage Tip covers a couple of questions I received when I posted on Twitter asking Realtors, “What’s the number one question first time home buyers ask you about mortgages?”

Shaun Miller from Remax Colonial Pacific Realty in White Rock tweeted back saying many first time buyers have some confusion with the deposit for the purchase and ask how that factors into the mortgage & their financing.

Johnathan Drisdelle from The Austin Drisdelle in Fredericton tweeted that many first time buyers still ask if they need 10% down.

Both excellent questions and here are the answers:

How does the deposit for your purchase that you give your Realtor upon subject removal factor into your mortgage & the financing process?

The deposit is different than a mortgage down payment. The purpose of placing a deposit is to show your commitment to buying the subject property. The deposit on typical real estate transactions is usually between 5-10% of the property’s selling price and once subjects are removed the deposit is held “In Trust” with your real estate broker. Ultimately, if you end up purchasing the home your deposit can form all or part of your mortgage down payment and this will be reflected when you sign the final paperwork at your solicitor.
Many first time buyers also use all or part of their RRSP’s under the First Time Home Buyers Program. If this is the case it is important to discuss with your Mortgage Broker regarding the deposit amount you wish to place with your offer to purchase. You want to ensure your funds will be available in time to provide the deposit to your Realtor. Depending on what type of product your investments are in the time to arrive in your chequing/savings account can take some time.

What is the minimum down payment required to purchase a home in Canada?

The minimum down payment required for home purchases in Canada is 5% for owner occupied and second homes. There is also the possibility of a zero down/ 5% Cash Back mortgage for well qualified borrowers.

There is also the option to use a gifted down payment for your property purchase.

There are times however when a larger down payment is required. For example: Self Employed borrowers without 3rd party income verification require a minimum 10% down payment to use lenders stated income products, Rental properties require 20% down payment and depending on your particular situation and credit history lenders may require a higher down payment.

For more information on the Home buying process in Canada download our HomeBuyers Guide or leave a comment with any questions you may have.