How Much is a Down Payment on a House?

Exciting news – you are thinking about home ownership! This is an exciting time, but it does require strategic financial planning to ensure that you are staying within a budget you feel comfortable with!

How Much Downpayment Do I Need For a House?

In Canada, the Federal minimum down payment for a house depends on the purchase price of your home. Normally, the “set” down payment amount is 5% of the purchase price. However, this amount is set to the first $500,000. Here’s how to calculate down payment:

5% on $500,000
10% on a portion of the purchase between $500,000-1.5M
20% on all values above $1.5M

For example, if you buy a home at the purchase price of $450,000, you will need 5% of this or $22,500. Or, if you are purchasing a home at $600,000, since this is over the $500,000 (5%) amount, you will need 10% of the purchase price, which is a deposit of $35,000. Homes that are priced at the 1.25M mark will require a 20% deposit on the purchase price.

Preparing to buy a home? Check out these blogs for more advice!

Average Down Payment on a House in Guelph

Now, let’s take a peek at the Housing Market in Guelph based on its recent trends and numbers.

Average Sale Price for Detached Home: $777,750
Total Unit Sales: 178 Units
Unit/Sales Listing Ratio: 41.30%

Since the average home in Guelph sells for $777,750, the average downpayment, if you put down 10% of the purchase price is $77,775.

Securing a Mortgage

When you are making a down payment on your home, there is a tip for avoiding the default insurance, and you do so by putting more down than the minimum percentage. By meeting (sometimes) or exceeding the 20% down, you have a chance of avoiding the CMHC premium of (0.6-4.5%).

Oftentimes, lenders will offer better interest rates with larger down payments– this is particularly true when the down payment made is 25-35% because it significantly reduces risk factors. As mentioned, even if you are putting a little more than 20% down, you are more likely to save money overall in comparison to securing a large CMHC premium.

First-Time Home Buyer Tips

CMHC First Time Home Buyer Incentives

A great way to assist with your deposit when buying your first home! Up to 5% on resale homes and 10% on new-build homes is offered in return for shared equity. Eligibility is capped by income for those who are taking in more than $120,000 a year.

Land Transfer Tax Rebates

These are also a great option in Ontario and can help offset some of the closing costs– if you are a first time buyer then you can be reimbursed up to $4,000 on this tax (if your tax is less than $4,000 you do not have to pay for it and if its more than ie: $6,000, you pay $2,000 after the rebate).

Canada’s First Time Home Savings Account

This method combines the best of an RRSP and a TFSA – and is a powerful tool for helping with a first-time home buyer down payment:

You can contribute up to $8,000 a year to this.
These contributions are tax-deductible (similar to the structure of an RRSP).
ANY withdrawals for the purpose of a home purchase are tax-free, just like a TFSA.

Other Tips for Helping with a Down Payment For Your Home

Tax Free Savings Account

A TFSA is a flexible savings account where your money has the ability to grow while remaining tax-free! It can help you consciously remember to put down money for your home as you prepare to begin your journey towards home ownership.

Here are the primary benefits of a TFSA:

You can withdraw from the account anytime.
There are NO tax penalties applied to the account.
It is recommended as a form of intentionally saving.

Home Buyer’s Plan (RRSP)

An RRSP allows you to borrow money to offset fees associated with home-ownership from your RRSP when you are in the process of purchasing.

Some of the general rules and benefits of this structure are:

You can withdraw up to $60,000 from your RRSP.
If you are buying with your partner, that is $120,000 combined in permitted withdrawals!
You have up to 15 years to pay it back on most plans– this plan will start the second you have bought your home and you will not have to pay the HST on the amount you owe as long as you repay it accordingly each year.

Now what happens next? You make an action plan to work towards your down payment and homeownership broadly. There are many steps to buying your first home, and since this is all new, it can feel overwhelming when it is all coming at you at once. This is why we are here: to help break down those steps with our expert knowledge and industry experience.

Want to build your dream home? Explore these related readings next!

How to Buy a House

Determining your budget: This will help you understand what style of home you will be able to afford (condo, townhome, detached).
Define the home you are looking for: the next step is only natural– you will want to determine the style of home that works best for you and your budget.
Define Your Minimum: Refer back to the previous chart and determine what minimum your budget requires.
Set a Monthly and Annual Savings Goal.
Look Into Opening a TFSA or an RRSP: This will be the best way to keep track of your savings and intentionally put aside funds.
Connect with a Trusted Mortgage Broker: explore the available first-time home-buyer incentives.

The summer market is heating up and inventory is high! If you are considering jumping in, now is a great time to make the move! Contact the experts in Rural Realty at Capstone REPS today! Reach us by email at info@capstonereps.com or call 519.824.9050.