How Much Is A Down Payment On A Condo in BC For A Buyer

by Richard Morrison
January 25, 2020
Buying
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Key Takeaway:

Down payments on condos in BC range from 5% to 20% of the purchase price, depending on the price of the property. First-time homebuyers have access to programs that can assist with coming up with a down payment. The size of your down payment affects the total cost of your mortgage, so it’s ideal to put down as much as you can comfortably afford.

Purchasing a condo can be an affordable way to enter the real estate market, especially in desirable cities like Vancouver and Victoria where detached home prices have skyrocketed out of reach for many buyers. But coming up with the down payment, which is the portion of the condo’s purchase price that you pay upfront, can still prove challenging without careful planning and saving.

How much you need to put down depends primarily on the price of the condo you want to buy. Here’s a look at the minimum down payment requirements for condos at different price points in BC.

Down Payments on Condos $500,000 and Under

For condos priced at $500,000 or less, you’ll need a minimum down payment of 5% of the purchase price. On a $400,000 condo for example, 5% works out to $20,000. While 5% is the legal minimum, a larger down payment of 10-20% is recommended if you can afford it, for reasons we’ll explore shortly.

Down Payments on Condos $500,000 – $999,999

In this mid-range price bracket, your minimum down payment is 5% of the first $500,000 of the purchase price, plus 10% of the portion above $500,000. On a $700,000 condo for instance, you’d need 5% of $500,000 ($25,000) plus 10% of the remaining $200,000 ($20,000), for a total minimum of $45,000 down.

Down Payments on Condos $1 Million and Up

For luxury condos priced at $1 million or more, a substantial down payment of at least 20% of the total purchase price is required. On a condo costing $1.2 million, 20% works out to $240,000 down.

Investment Condos Require 20% Down Minimum Regardless of Price

If you’re purchasing the condo purely as an investment property that you plan to rent out rather than live in yourself, you’ll need to put at least 20% down, no matter if it’s priced under $500,000.

Why You Should Put Down More if Possible

While putting down the minimum 5-20% is certainly better than nothing, there are important benefits to maximizing your down payment if you can afford to:

Lower Mortgage Insurance Premiums

If your down payment is less than 20% of the purchase price, you’ll be required to purchase mortgage loan insurance, which protects the lender if you default on the mortgage. This premium can range from 0.6-4.5% of the mortgage amount and is added to your total mortgage loan. The larger your down payment, the lower your mortgage insurance costs will be.

Lower Interest Costs

The more you put down upfront, the smaller your mortgage loan will be, saving you significantly on interest costs over the lifetime of the loan. For example, on a $400,000 condo with a 25-year mortgage at 4% interest, putting 20% down would save over $58,000 in interest compared to only putting 5% down!

Shorter Amortization Period

You may qualify for a mortgage with a shorter amortization period (i.e. 20 years instead of 25 years) if you put down more than the minimum, letting you pay off your mortgage faster and save on total interest.

Better Interest Rates

Lenders often offer lower mortgage rates to buyers who make larger down payments, as they are seen as lower lending risks. Even a small reduction of 0.5% in your rate can really add up over the years.

Assistance Programs for First-Time Homebuyers

As a realtor who often works with first-time condo buyers, I know saving up even 5% for a down payment can be a big hurdle. But there are some great federal and provincial programs available to help you buy your first home.

Home Buyer’s Plan

The Home Buyer’s Plan allows you to withdraw up to $35,000 from your RRSPs tax-free to put towards your down payment. As long as you repay the amount over 15 years, you avoid paying tax on the withdrawal.

First-Time Home Buyer Incentive

This federal program offers a type of shared equity mortgage where the government contributes 5-10% of the purchase price of a new condo build, which you repay after 25 years or when you sell. It helps reduce your down payment requirements.

Land Transfer Tax Rebates

In BC, first-time buyers may qualify for an exemption from the property transfer tax of up to $7,500, easing your closing costs.

Property Tax Deferral Program

BC residents 55 and older, or surviving spouses of any age, can defer their annual property taxes through an interest-free loan program. Less cash needed for property tax each year makes it easier to carry a mortgage.

RRSP Home Buyer’s Plan

This provincial program allows first-time buyers to withdraw up to $25,000 tax-free from their RRSP for a down payment in addition to the federal HBP, for a combined total of up to $70,000 withdrawn from your RRSP tax-free!

Look Beyond Mortgage Rates When Shopping Lenders

Mortgage rates attract the most attention, but also ask lenders about:

Mortgage loan insurance premiums – can make a big impact on total cost
Penalties for prepayment or refinancing – some are oppressively high
Amortization requirements – shorter = better
Portability – key if you sell before maturity
Prepayment privileges – ability to pay more principal

Getting the lowest rate doesn’t always mean the best overall deal. You need to look at the full picture.

Creative Ways to Bridge the Down Payment Gap

Sometimes circumstances simply don’t allow you to save a full 20% down payment. Here are some alternative options I’ve seen clients utilize to make home ownership happen:

Ask family for a loan or gift. Set clear terms and timeline for repayment.
Take on a part-time job or side hustle for a set period to boost savings.
Save aggressively on all discretionary spending for a few years.
Withdraw from your RRSPs under the Home Buyer’s Plan.
Borrow against home equity if you currently own.
Delay purchasing until you’ve saved more.

Other Condo Purchase Costs

While the down payment is a major upfront cost, keep in mind you’ll also need cash on hand for other closing expenses like legal fees, property transfer taxes, home inspections, and moving costs. Budget for these additional costs as you plan your condo purchase.

FAQs

Q: How much does a down payment on a condo cost?

A: The amount of the down payment depends on the purchase price of the property and typically varies between 5-20% of the purchase price. If you are buying a pre-construction condo, you may need to put down a larger deposit.

Q: What is the benefit of a minimum down payment for buying a condo?

A: When you make a minimum down payment when purchasing a condo, you reduce your mortgage payment and could qualify for lower rates. This can help you save money in the long run and secure your dream home.

Q: How much is a down payment on an apartment?

A: The amount of the down payment depends on the purchase price of the property and typically varies between 5-20% of the purchase price. For example, if you are looking to buy an apartment that costs $400,000, then your down payment should be at least $20,000 (5%).

Q: What do I need to know before I buy a condo?

A: Before you buy a condo, it’s important to know everything about what comes with owning one. You should understand what fees and taxes come with ownership as well as how much mortgage default insurance will cost if applicable. Additionally, make sure to research market trends in order to get an idea about future value of your condo.

Q: What is mortgage default insurance and why do I need it?

A: Mortgage default insurance protects lenders from losses if borrowers fail to repay their mortgages. It is required by law when buyers put less than 20% as their initial deposit towards the purchase of their home. In Canada, mortgage default insurance is provided by CMHC or Genworth Financial.

Q: Can I use retirement funds for my down payment?

A: Thankfully, yes! You can use funds from registered retirement savings plans (RRSP) or tax-free savings accounts (TFSAs) towards your home’s purchase price as long as they have been held in those accounts for at least 90 days prior to withdrawing them.

Q: How much money do I need to put towards my first condo?

A: The amount of money that you need to put towards your first condo depends on several factors including but not limited to affordability and how much money will be covered by your lender. Typically it’s recommended that buyers put as low as 5% towards their first condo.

Q: Is there any guide available for someone who wants to buy pre-construction condos?

A: Yes! There are many resources available online for those wanting to buy pre-construction condos such as guides that discuss everything from securing financing and applying for credit all the way through understanding deposits and paying back mortgages.

Q : Is it better to buy resale or pre-construction condos?

A : It ultimately depends on individual preferences . Resale condos tend to be more expensive but require less paperwork , while pre – construction condos can be cheaper initially but require more paperwork . Be sure to weigh all options before making such a big purchase.

Q : What happens if I cannot make my mortgage payments ?

A : If you fail to make your scheduled mortgage payments , this is known as mortgage default . Ultimately , this could lead up to foreclosure proceedings where your lender will attempt seize any equity left in order for them pay back some of their losses.

Conclusion

When it comes to purchasing a condo in BC, the down payment is an important factor to consider. The payment amount and percentage required depend on the property you are looking to purchase. In 2021, typically a minimum of 5 percent is required when investing in a conversation. However, depending on your mortgage lender, this may be as low as 5 percent or as high as 20 percent.

This money you put down will need to be insured by your lender before you become eligible for the mortgage. If you would like to get closer to owning your dream property, then saving at least 20 percent of the total dollar amount is recommended. Although down payments can seem daunting, they are essential when trying to purchase a property in BC.

Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.

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