Can I Buy a Home with Less than 20 Percent Down?
Can you buy a home with less than 20 percent down? The answer is an emphatic yes! If you heard that you must have 20 percent down, that is not correct. The minimum down payment is just 5% for a single-family or two-unit property.
For many buyers, waiting years to save up the extra money just doesn’t make sense. Particularly in a market that is growing extremely quickly, such as the GTA area. Getting into a property so you can start to build equity is possible and far more common with just 5%. In fact, a survey from the Canadian Association of Accredited Mortgage Professionals showed that 45% of those purchased since 2007 had less than 20% for a down payment. Over half a million sales would have been lost in that year alone if a 20% down payment had been a need. Most lenders require 5% down for most properties and will consider a mortgage of up to $1,000,000. 94% of all buyers purchase homes for under the one-million dollar mark anyway. So you will have a wide selection of homes to choose from despite the million dollar cap.
Even though you can buy with only 5% down, there are also mortgage products available that allow you to put even less down. This option should only be persued if you don’t want to wait to get into a home. Some lenders offer incentives such as cash-back programs where they will lend you the 5% in exchange for a higher interest rate throughout the entire mortgage. Another possibility for a down payment is a generous family member. Many lenders will consider a gifted down payment from a family member such as a parent, grandparent or sibling. These are normally acceptable for up to a 4 unit purchase.
While a 5% minimum is the norm for most single-family dwellings or two-unit dwellings. 10% is more common for rental properties. If you are thinking of buying a revenue property, three of four-unit dwellings may be purchased for just 10% down. Most buyers don’t want to invest a lot of their own money in a property that they want to use for wealth generation. Therefore, a lower down payment is preferable. It is very important that you have someone checking out what each lender has to offer as it varies tremendously. There are criteria for qualifying and not all lenders offer all types of mortgages.
If you are looking to buy a home with less than 20 percent down, but feel that you do not have enough cash to do so, speak to a mortgage specialist from mortgages.ca. Mortgage brokerage services are free for you to use. There are many mortgage products available and many avenues to get into a home. Most buyers are not fully aware of these avenues. The mortgage business changes quickly, so visit a professional who makes it their business to know what is going on and how it can help you.