Saving for a Down Payment

Provided by Genworth Financial Canada

If you are considering Home Ownership but have questions about the down payment, this article will clarify some of the commonly asked questions.

How Much Money do You Need to Make a Down Payment?
You can buy a house for as little as 5% down, but remember that the larger the down payment, the easier the other expenses will be to manage. We encourage you to calculate what you can afford to work out what's best for you. Once you're ready to put an offer on a property you'll need part of your down payment as a deposit, so remember to keep some funds easily available and accessible.

Will the Size of Your Down Payment Affect the Type of Mortgage You Get?
If you make a down payment of 25% or more, of the lending value, you may qualify for a conventional mortgage. If you are making a down payment of less than 25%, the mortgage must be insured. The insurance protects the lender against borrower default. Your lender will arrange for mortgage default insurance.

How Will You Save Enough Money for a Down Payment?
Saving enough money to buy a home can seem overwhelming, but you may be able to get your down payment faster with a savings or investment plan.

1. Personal Bank Accounts
   Open a bank account and set aside money specifically for your new home. Make a habit of paying into this account on a regular basis, just as you pay your monthly bills. Remember that you will need cash (or a certified cheque) for the down payment and the closing costs associated with buying a home.
   
   
2. Investments
   As the money in your bank account grows, or if you already have money set aside, you may want to invest.
   
   
3. Using RRSPs towards your Down Payment
   Registered Retirement Savings Plans are a good way to secure your financial future while enjoying tax benefits today. You may also be able to use your RRSP savings towards the purchase of a home. The current Home Buyers' Plan permits the first-time homebuyer to withdraw up to $20,000 from their RRSP to buy or build a home. The amount withdrawn is treated as a loan and must be repaid within a 15-year period, commencing in the third year after the withdrawal.