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Purchasing with Less Than 20% Down
“For those who have financed or renewed a mortgage during the past 12 months, the average mortgage rate is 3.75.” Canadian Association of Accredited Mortgage Professionals (CAAMP), Annual State of the Residential Mortgage Market.
With interest rates so low, many Canadians are entering the housing market earlier than ever before. CMHC (Canada Mortgage & Housing Corporation) is actively insuring home buyers with as little as 5% down payment.
How are Canadians entering into home ownership with less than 20% down payment?
A down payment is accepted if drawn from any combination of the forms listed below.
- Savings Account
- Tax Free Savings Account (TSFA)
- Checking Account
- Term Deposit
- GIC
- Savings Bond
- Stocks
- Mutual Funds
- RRSP: Visit the Canada Revenue Agency’s website for more information on the Home Buyer’s Plan (HBP)
- Gifted Down Payment
- Lender 5% Cash Back Program
In 2003 the mortgage rules within Canada were adjusted and the cap on the purchase price for homes purchased with less than 5% down were removed.
Even with the abscence of this mortgage rule, Lenders have taken their own steps to protect themselves and the client.
Obtaining a mortgage approval of over $600,000 means either ”tiered” rate financing, and or additional conditions on financing.
Coupled with low rates are higher wages.
The 2011 Culpepper Salary Increase Budget Update Survey show that “salary budgets for 2011, including salary increases, salary range increases, promotional increases, and variable incentives are all higher than 2010.”
Low rates, higher wages, no cap on insured purchase price & the ability to purchase with less than 20% down payment, CAAMP forecasts mortgage approvals to be at $203 billion for 2011 and $211 billion in 2012.
