Are you considering buying a house or a condo? Are you wondering if there are incentive programs and measures available and tailored to your financial situation? The first thing to do is to reach out to a competent real estate broker to help you find a property. However, a mortgage broker is just as important to find the appropriate incentives and programs that could help you raise or improve your down payment.

Understanding the basics of the minimum down payment

The minimum down payment is a crucial requirement when purchasing any type of property. In fact, this is the initial amount you will give when purchasing your home. This down payment is subtracted from the purchase price of your property and the mortgage granted by a lender will cover the balance of the sale price. The minimum amount you provide depends on the purchase price of the property. If your down payment does not reach 20% of the purchase price of your property, mortgage insurance will be required to complete your financial package.

What is mortgage insurance?

Mortgage insurance is designed to protect the lender in the event of your defaulting on the mortgage. It is not intended to protect the buyer. If your down payment is less than 20% of the purchase price of your property, you will be required to take out mortgage insurance. Note that if you are self-employed or have a poor credit history, you may be required to obtain mortgage insurance.

Mortgage insurance is not available if the purchase price of the desired home is over $1 million, and the loan does not meet the insurance company's requirements. You can pay your premium by adding it to the mortgage loan granted or simply by paying a lump sum. If you add the premium to your mortgage, you will be charged interest on the premium. This interest is the same as the interest on your mortgage.

The Home Buyers' Plan (HBP): a catalyst to consider

Is your down payment too small? The Home Buyers' Plan (HBP) can help you. This program allows you to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP), tax-free. Of course, you will have to use the amount to purchase or build a house that meets the eligibility requirements. You then have 15 years to repay the amount withdrawn from your RRSP.

Before choosing this program, you will need to assess your actual ability to make the payments and estimate whether this withdrawal of funds will have an impact on your planned savings for retirement. Please note that if you do not make the required payments, you may be penalized on your income tax refunds, as the withdrawal no longer benefits from financial growth since the money is no longer in your savings plan.

What is the first-time homebuyer incentive?

Buying your first home? You may qualify for some help from the Government of Canada. This type of loan offers you interest-free financing to help reduce your monthly mortgage payments without increasing the sum your down payment.

The federal government offers first-time homebuyers a loan percentage of 5% of the total value of an existing property and 5 to 10% for the purchase of a new property. This amount must be repaid within 25 years or when the property is sold. You can also repay this loan at any time without incurring a prepayment penalty. The amount of this incentive is based on the fair market value of the property at the time of repayment. To obtain an accurate estimate of the value of your property at the time of repayment, you will need to reach out to a qualified real estate appraiser.

Many additional programs and incentives are also available... hence the importance of being well guided and advised by a competent mortgage broker who will be able to build the best possible financial structure for you. By doing so, you will be able to buy your property with peace of mind and within your budget.