How much will it cost
All the lenders are required to ask for a minimum of 5% down payment
in order to approve financing. There are also other fees that need to be
taken into consideration such as legal fees, property tax adjustments
and Transfer tax.
To explain a little more, here an example;
Let say someone purchase a property for $200,000 and the closing date is June 30th. The property tax on this property are $2,500 per year.
The minimum down payment would be $10,000 (5%)
Legal fees including title insurance are approximately $1,200
Property tax adjustments would be $1,250 ($2,500/365 days x 180 days left in the year)
Title transfer tax would be $2,000 (1% of the purchase price of assessment value. Whichever is more)
In this example, the total cost would be $14,450.
Down payment options
Gifted Down Payment - The Down payment can be gifted. A Gift Letter will then be required.
Gifted Equity - Gifted Equity occur when a someone is selling a property to another family member. An appraisal is required in all cases.
Own Resources funds - If you have funds in your account, the lenders will require proof by way of 90 days bank statements to confirm that they are from your own resources.
Borrowed from other Credit - As long as your debt ratio is still in line, some lenders will let you use borrowed funds to purchase a house under their Flex Program.
Mortgage Insurance - CMHC, Genworth, Canada Guaranty
Mortgage insurance is required when purchasing a house with a down payment between 5% and 15%. When using 20%, the insurance is not required. In most cases, the lenders are offering lower rates when the loan is insured. This insurance is not the same as life insurance. It covers the bank in case of default on payments and foreclosure. The premium is added to the mortgage.
Here's how the premium are calculated;
Up to and including 65% 0.60%
Up to and including 75% 1.70%
Up to and including 80% 2.40%
Up to and including 85% 2.80%
Up to and including 90% 3.10%
Up to and including 95% 4.00%
Up to 25% premium refund may be available when CMHC Mortgage Loan Insurance is used to finance an Energy-Efficient Home.