Mortgage down payments aren’t a one-size-fits-all
Mortgage interest rates are all the way down. Property prices on the other hand, are through the roof. Are you truly in position to buy a home?
The question of how much to put down as a down payment is a subjective one and is one of the biggest factors to consider in deciding whether or not you are ready to take on a mortgage. Some will argue that you should only put down the minimum required with interest rates so low. Others will argue you should always put down at least 20 percent to avoid paying CMHC (Canada Mortgage and Housing Corporation) insurance. It’s not a one-size-fits-all and here are the reasons why:
HOW MUCH HAVE YOU REALLY SAVED UP?
Emergency savings, vacation savings, other investments. When it comes to making a down payment, it can be very easy to look at the behemoth of a mortgage ahead of you and pool all those funds together to put together a down payment. Be careful, though. Putting away a vacation for a little while is one thing, having no emergency funds to deal with unforeseen circumstances can be a disaster.
Yes, it’d be nice to max out that down payment but especially with current interest rates it’s really important to make sure you have some room for flexibility and – in financial speak – liquidity, when it comes to managing your money while making mortgage payments.
WHAT ARE YOUR CIRCUMSTANCES?
Being honest with yourself about your job circumstances is probably the most important factor outside of how much you’ve actually saved up for a down payment. Ask yourself, how volatile is your industry? Have you been laid off before? If your reality is such that it could happen again, these are all things worthy of keeping in mind when making a down payment. If you have substantial enough savings, maybe even going beyond the 20 percent down payment makes sense because it can reduce that regular mortgage payment amount – something you’ll be thankful for if you ever were to suffer job loss or be unable to work for whatever reason.
Have plenty of job security? Well, then you can view things differently and may be more inclined to have a regular or lower down payment and max out the benefit of current interest rates.
WHAT’S THE PURPOSE OF THE PROPERTY?
Is this your primary residence or a rental property? Rental properties require a 20 percent down payment while depending on the circumstances, a down payment as low as five percent may suffice for a primary residence.
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*The New Client 2.10% Interest Rate and $150 Cash Bonus Bundle Offer (the "Offer") is available to new Tangerine Clients who: (a) have a Client Number created between November 24, 2020 and July 31, 2021, (b) become a Tangerine Client using the Promo Code “EARNMORE”, (c) open an Applicable Savings Account within 30 days of the date their Client Number was created, and (d) open a Tangerine Chequing Account within 30 days of the date their Client Number was created (collectively the “Offer Qualifying Conditions”). The 2.10% Promotional Rate will apply to deposits made to an Eligible Client’s Applicable Savings Account(s) for 153 days (5 months) beginning on the date all Offer Qualifying Conditions have been met, to a maximum of $1,000,000 (in the currency of the Applicable Account) per Applicable Savings Account Type (for deposits to registered Applicable Savings Accounts made through a T2033 form, please see the full Offer Terms and Conditions). The Promotional Rate is an annualized rate, calculated daily and paid monthly. To be eligible for the $150 Cash Bonus, in addition to meeting all Offer Qualifying Conditions, an Eligible Client must switch their eligible payroll direct deposit for at least 3 consecutive months and must have the first payroll direct deposit received in their Tangerine Chequing Account within 60 days of Chequing Account opening. Limit of one (1) Cash Bonus per Primary Account Holder. The Offer is only applicable to Accounts where the Eligible Client is the Primary Account Holder. Offer is not transferable and can’t be combined with other promotional savings rate offers or chequing cash bonus offers. Full Offer Terms and Conditions, including definitions of any capitalized terms and a list of eligible payroll direct deposits, are available here. Offer may be changed, extended or cancelled without notice.