Buying a home can feel like quite the challenge. If you’re already paying rent, you at least have an idea of what it’s like managing high monthly costs. Those monthly costs usually aren’t the issue when planning to buy a home. One of the most common barriers to home ownership is saving for the down payment.
Saving for a 20% down payment can be quite difficult and can put off buying a home for years. If you’re still hoping to purchase a home but see that 20% down payment as an obstacle, then getting an insured mortgage with less than 20% down payment is an option.
An insured mortgage requires home buyers to have mortgage insurance from one of Canada’s three insurers: Canada Mortgage and Housing Corporation (CMHC), Sagen (previously Genworth), or Canada Guaranty (CG). Mortgage insurance protects the lender in the event that you’re not able to pay your mortgage.
How much will mortgage insurance cost you?
Mortgage insurance will cost in the neighbourhood of 2.8% – 4% of the mortgage amount.
How to decrease mortgage insurance?
Increase your down payment.
- 5% down payment = 4.0% of the mortgage amount
- 10% down payment = 3.1% of the mortgage amount
- 15% down payment = 2.8% of the mortgage amount
How to completely avoid mortgage insurance?
The only real way to completely avoid mortgage insurance is to come up with the full 20% down payment.
Is avoiding mortgage insurance worth the effort?
Your goal when you first started saving for a home was to buy one. Whether or not you had a specific timeline in mind, paying the extra mortgage insurance allows you to get to your goal that much faster, even though it’s at a cost.
Are there benefits to putting less than 20% down?
Lower rates! Insured mortgages are less risk for lenders, therefore they can offer lower rates to home buyers.
To find out how much you can afford, your mortgage payments and what the best option is for you, give me a call at 780-288-0643.
Tatum Neufeld, BComm
Mortgage Broker • Mortgage Tailors