When you are planning to purchase a home, your down payment is a critical part of determining what you can afford. Knowing how much to put down, when to start saving, and how these factors can impact you is critical. In Canada, your down payment will vary based on the housing type, size, and location you are interested in. By understanding how much you need to save for your down payment, you’ll be able to get a better idea of your readiness to buy. To help you get started with your homebuying goals, we’re going to go over everything you need to know about down payments for Kootenay real estate.
Follow along below to learn more.
What is a Down Payment?
A down payment is a lump sum that a buyer will pay when purchasing a property. This payment accounts for a portion of the real estate’s total purchase price. If the homebuyer is not paying for the property in cash, then they will need to finance the remainder of the cost with the help of a financial institution. For example, a mortgage broker or a bank. The more that a buyer puts down on their purchase, the less they will need to finance after the fact. This in turn makes for lower monthly mortgage payments and less interest paid.
It is important to remember that a down payment is not the same as a deposit. Your deposit is a cheque or bank draft that goes along with your Offer to Purchase. This amount will count towards your down payment, but won’t fully cover it. Most buyers spend around $10,000 for their deposit, but this is largely dependent on the property and the buyer’s level of commitment.
If you’re still unclear about what a down payment is, or how it differs from your deposit, reach out to your real estate agent. Alternatively, you could consult with a trusted financial advisor or real estate lawyer.
What do I Need to Save for my Down Payment on Kootenay Real Estate?
Knowing how much to save is a critical first step in purchasing a home. While there are several costs associated with buying, this section will be dedicated to saving for a down payment.
As we mentioned earlier, for Canadian buyers, saving for a down payment varies depending on the buyer’s goals. However, there are a few rules surrounding the minimum down payment amount in Canada. For example, if you are purchasing a home that is below $500,000 you need to put at minimum 5% down. Comparatively, if you are purchasing a home between $500,000 and $999,999 then you would need to ensure a down payment of at least 10%.
With this in mind, buyers should know that these are the bare minimums needed to receive financing from a lender. In fact, by putting less than 20% down on your home you will need to pay for mortgage default insurance. This way, financiers are covered if a buyer defaults on their payments. Mortgage insurance can be purchased upfront or tacked on to your monthly payments.
If you do not want to pay for mortgage insurance, you need to save for a down payment that is 20% or greater.
How to Save + Government Incentives!
If you’re ready to start saving, you must develop a game plan to make sure that you hit your target. For lots of Canadians, saving for a down payment is the most challenging part of reaching homeownership. So, you’ll want to guarantee your success with a bulletproof plan.
One of the best first steps to take is to determine the amount of money you need to save. Talk with a real estate agent about what sorts of properties you are interested in to get a better idea of this number. After this, you can start putting away money each month to get closer to your goal. During the time that you are saving, do your best to spend money only on necessities. This means doing away with eating out, having coffee at home, and buying used instead of new. These simple changes can help ensure that you reach your goal sooner!
If you’re still struggling to save, there are several government programs to assist you in your first home purchase. Canada’s Home Buyer’s Plan lets first-time home buyers (FTHBs) borrow up to $35,000 from their RRSP. Another new program to help FTHBs is the First Time Home Buyer Incentive. This program is an interest-free, shared-equity mortgage that can be repaid when the home is sold or after 25 years.
Another great option for FTHBs is the First Home Savings Account (FHSA). This was introduced in 2022 to assist Canadians in purchasing their first property. You can contribute up to $8,000 annually with a maximum lifetime contribution limit of $40,000. If you’re wondering what makes this account special, it’s the fact that you get all of the perks of a TFSA and an RRSP combined!
Contact us Today About Kootenay Real Estate!
Are you ready to buy Kootenay real estate this spring? Start the process today with the help of one of our local REALTORS®! For more information about homes for sale in the area, contact us today. Check out our social media for the latest updates and more. Also, don’t forget to visit our blog next month for more real estate-related information.
We look forward to working with you!