Purchasing a home is probably the largest financial commitment that you will make in your life. Purchasing a home takes advance planning to ensure that when the time comes, you will financially be in a good position. Where does one start?
The first step is having the downpayment. A downpayment is the amount of money that you will put towards the purchase price of your home. The remainder will be covered by a mortgage loan from a financial institution. Financial institutions will want to know exactly how much money you have for the downpayment.
Having a 5% downpayment means that this is classified as a high ratio mortgage and mortgage default insurance is required from an insurer such as Canada Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty Mortgage Insurance Company.
If you have a 20% downpayment, this is classified as a conventional mortgage and mortgage default insurance is not generally required. There may be situations where more than a 20% downpayment may be required (e.g. self employed, not a salaried employee, no credit history).
The more money you have for a downpayment the less you money you need for a mortgage, which in the long term will save you on the interest charges and put more money in your pocket rather than your financial institutions.
For more detailed information, check out the same topic under Real Estate Services.