When purchasing a home in Collingwood, many financial experts will recommend that you provide 20% of the home’s purchase price as a down payment. This size of your down payment will increase the likelihood that you qualify for financing and can lower your monthly payments. However, a 20% down payment is not mandatory.
How Much of a Down Payment Do I Need?
The amount of money you must provide as a down payment will depend on the purchase price of the home you wish to purchase in Collingwood. The minimum requirements are as follows:
For a home that is $500,000 or less, you must provide a minimum down payment of 5% of the home’s purchase price.
For a home that costs between $500,000 and $999,999, you must provide 5% of the first $500,000 of the home’s purchase price and then 10% for the portion of the purchase price above $500,000.
If the home you plan to purchase costs $1 million or more, you will be required to provide 20% of the home’s purchase price.
Keep in mind there may be exceptions to these rules and you may be required to provide a larger down payment. For example, if your credit score is low, your lender may require more money upfront to qualify for financing. If you are self-employed, you may also be asked to provide a larger down payment.
What is Mortgage Loan Insurance
While it is possible to pay less than a 20% down payment, be aware that you will be required to purchase mortgage loan insurance. This is a safety net for the lender in case you are not able to pay your monthly mortgage payment and you default on the loan. Typically, your monthly insurance premium will cost between 0.6% and 4.5% of your home’s sale price. However, this amount will differ depending on the size of your down payment and your current financial situation.
Thankfully, you do not have to worry about one more monthly payment. Typically, your lender will include this premium with your monthly mortgage payment. You will often not notice it is there but your monthly payment will increase. If you desire, you will also have the option to pay a lump sum of the insurance premium at once.
Also, be aware that in Ontario, a provincial sales tax will be applied to your premium.
If you have any questions about purchasing a home in Collingwood, the best lenders in the area to work with, and more, visit with Collingwood real estate agent Christine Smith. She can help you purchase your dream home in the area and answer all of your real estate questions.