Your Down Payment: Vital Information for Newcomers to CanadaAdmin
When buying a home in Canada, even Canadians don’t purchase their home by paying for the entire cost. As a newcomer, you’re also not expected to cover the full cost without help. For instance, when you purchase a home in Canada there are two financial money sources that can help you:
Source #1: A mortgage
Your mortgage is a legal agreement that allows you to borrow money from a lender, such as a bank or private lender.
Source #2: Your down payment
Your down payment is a lot of your own funds, that you will pay down on your home. It goes against the purchase price of your home. For instance, as a newcomer if you pay the minimum 35% down, you wouldn’t need to borrow the full 100%, you can borrow less. This will actually decrease your interest costs as well.
The amount of down payment you’ll require is dependant on your:
● Employment history
● Immigration status in Canada
Let’s explore this further….
Partial minimum down payment & two years of employment history
Stability and proof will go a long way. If you can prove that you have been working steadily at the same job for the last two years, and you have a downpayment of at least 20 percent saved up, the good news is you may qualify for what we call a “conventional” mortgage. What this means is that you won’t need to buy default insurance, which can be quite an expense. However, if you don’t have at least 20 percent saved, you can still qualify but you’ll have to purchase default insurance.
Full minimum down payment or more without two years of employment
You may still be able to qualify for a mortgage even if you’re not able to provide confirmation of your employment or income. You should have at least the minimum of 35 percent to pay down or more.
There are certain guidelines that need to be followed if you don’t have the 35 percent down payment. You must:
● Have immigrated within the last 5 years
● Be a permanent resident of Canada
● Have to be employed full time in Canada for a minimum of three months
● Be able to obtain a reference letter from your home bank (in your home country)
If you qualify for the mortgage after this, you’ll also need to insure it against mortgage default.
Are you looking for ways to save up your down payment and speed up the purchase of your first home? Speak to a mortgage broker, they can gain insights on your mortgage needs, advise you of options that meet your budget expectations, situation, and short or long-term goals and inform you on how to accelerate the process.