How Much You Need For A Minimum Down Payment On A House in BC
-
by Richard Morrison
- January 10, 2020
- Buying
- 0
When it comes to purchasing your first home in British Columbia, one of the biggest obstacles for many buyers is saving enough for the down payment. But how much do you really need to put down? The minimum down payment requirements in BC vary depending on the price of the home. Understanding the down payment rules can help you determine if homeownership is within your reach.
Key Takeaway
The minimum down payment to buy a home in BC is 5% for properties under $500,000. For homes priced between $500,000-$999,999, it’s 5% on the first $500,000 and 10% on the remainder. Over $1 million requires 20% down. While it’s possible to buy with the minimum, a larger down payment reduces your mortgage amount and total interest paid.
When working with first-time home buyers in Vancouver, I’ve seen how daunting it can be to save the down payment. But programs like the First Time Home Buyer Incentive help make ownership attainable for more British Columbians. Don’t let the down payment be the reason you give up on your dream of homeownership.
Read More:
- First Time Home Buyer BC Down Payment
- How to Buy a House with No Down Payment in Canada
- First Time Home Buyer Tips in BC
- What Are the Closing Costs of Buying a Home in BC?
- Can I Afford a Home in Vancouver, BC?
- Saving Up For a Down Payment Takes 400 Months in Vancouver
What is a Down Payment On A House?
A down payment is the amount of money you pay upfront when purchasing a home. It’s a percentage of the total purchase price that you pay in cash. The remainder of the purchase price is covered by a mortgage loan from a lender like a bank.
The down payment reduces the amount you need to borrow, so it lowers your monthly mortgage payments. It also provides instant equity in your home.
Minimum Down Payment Requirements in BC: How Much You Need
In British Columbia, the minimum down payment depends on the price of the home:
- Less than $500,000 – Minimum down payment is 5% of the purchase price
- $500,000 to $999,999 – Minimum down payment is 5% on the first $500,000 plus 10% on the portion above $500,000
- $1 million or more – Minimum down payment is 20% of the purchase price
For example, if you buy a home for $600,000, the minimum down payment would be:
- 5% of $500,000 = $25,000
- 10% of the remaining $100,000 = $10,000
- Total minimum down payment = $25,000 + $10,000 = $35,000
While those are the minimums set by the government, your mortgage lender may require a larger down payment if you have a poor credit score or are self-employed.
The Deposit is Part of Your Down Payment
When you make an offer to purchase a home, you’ll provide a deposit, usually around 5% of the purchase price. This deposit shows the seller you are serious.
If the deal completes, the deposit will be credited towards your down payment amount. For instance, if the home costs $500,000 and you provided a $25,000 deposit, you’d only need an additional $5,000 down payment at closing.
Benefits of a 20% or Larger Down Payment
While it’s possible to buy a home in BC with as little as 5% down, putting 20% or more down has some key advantages:
- Avoid mortgage insurance – If your down payment is less than 20% of the purchase price, you have to pay for CMHC mortgage insurance. This adds to your costs.
- Lower mortgage amount – The more you put down, the less you have to borrow. This reduces your monthly mortgage payments.
- Pay less interest – With a smaller mortgage loan, you pay less interest to the lender over the life of the mortgage. This saves you thousands long-term.
- Stronger approval chances – A larger down payment shows lenders you are financially ready for homeownership. This improves your odds of mortgage approval.
Down Payment Assistance Programs
Coming up with the down payment is the biggest barrier for many first-time buyers in BC. Fortunately, there are a few programs that can help:
- Home Buyer’s Plan – Lets you withdraw up to $35,000 from your RRSPs tax-free to use for your down payment. You have up to 15 years to repay it.
- First Time Home Buyer Incentive – The federal government offers a shared equity mortgage of 5% or 10% of the purchase price to reduce your mortgage required. The incentive must be repaid after 25 years or when you sell.
- Gifted down payment – A relative can gift you money to use for your down payment. Documentation is required to prove it is a gift, not a loan.
I’ve worked with many clients who used these programs to turn their dream of homeownership into reality. They make buying more affordable, but be sure to understand the repayment requirements.
Saving for the Down Payment
Ideally, you should start saving for a down payment as soon as you decide you want to buy. Here are some tips:
- Open a high-interest savings account and set up automatic transfers into it from each paycheck. Even small amounts add up over time.
- Make a budget to reduce discretionary spending so you can put more towards your down payment fund each month.
- Pay down debts so you have less monthly payments and can save more. Good credit also helps mortgage approval.
- Consider moving somewhere with a lower cost of living to accelerate your savings. Many first-time buyers move outside the Lower Mainland or Victoria.
With preparation and discipline, the down payment is an achievable goal on the path to owning your first home. Determine the minimum you need, make a savings plan, and take advantage of available programs. Don’t let the down payment keep you from achieving your dreams!
FAQs
Q: What is the minimum down payment to buy a house in BC?
A: The minimum down payment required to buy a property in BC is 5% of the purchase price of the home.
Q: What is the need for a down payment on a mortgage loan?
A: A down payment on a mortgage loan is necessary in order to reduce risk for the lender. It also helps you save money on mortgage default insurance, which protects the mortgage lender in case you default on your mortgage payments.
Q: How much do I need to save for a down payment when buying a home?
A: The amount that you need to save for a down payment depends on several factors, including the price of your home and your credit history. Generally speaking, if you are purchasing an existing home with less than 20% of the purchase price as your down payment, then you will need to have at least 5% of the purchase price saved up. If you are self-employed or have a poor credit history, then 10% may be required.
A: Mortgage loan insurance premiums are fees paid by borrowers who make a down payment of less than 20%. These premiums protect lenders should borrowers default on their monthly mortgage payments without adding it to their lump sum. Insurance premiums range from 0.6% – 4.00%, depending on the size of the mortgage and other factors.
Q: Is there any government help available when trying to buy a house?
A: Yes, the Government of Canada offers several programs that provide financing without interest or with low interest rates for those who would otherwise not qualify for mortgages due to poor credit history or income level. These programs include Home Buyers’ Plan (HBP) and Home Buyers’ Amount (HBA).
Q: How can I use my retirement savings towards buying a house?
A: You can use your retirement savings towards buying a property by taking advantage of the Home Buyers’ Plan (HBP). This plan allows first-time home buyers to withdraw up to $25,000 from their registered retirement savings plan (RRSP) tax-free towards purchasing or building their first home.
Q: What is high-ratio mortgage insurance and what does it cover?
A: High-ratio mortgage insurance protects lenders against losses in case borrowers default on their monthly payments without making any lump sum payments. This type of insurance covers up to 95% of the total cost of purchasing or constructing your home regardless of its price (up to 1 million). It also covers non-conventional mortgages such as self-employed applicants with poor credit history.
Q: What are some tips for going through the home buying process?
A: Some tips for going through the home buying process include getting preapproved before looking at homes, researching different types of mortgages, understanding all costs associated with homeownership, setting aside money for closing costs, saving enough money for an adequate down payment, considering future needs when selecting property location and size, researching current market trends, shopping around for competitive rates and researching additional financing options.
Q: Can I get financing without having 20%?
A: Yes , it is possible to get financing even if you don’t have 20 % as long as you pay off an additional premium known as high – ratio mortgage loan insurance . This type of insurance protects your lender from losses should you default on your monthly payments without making any lump sum payments.
Conclusion
When it comes to buying a property in Canada, there is a minimum down payment of 20% that is required for most home purchases. This means that you will need to have a minimum amount available for your purchase mortgage. Everything you need to know about the minimum down payment in British Columbia includes the remaining amount of 0.6%. It’s important to remember that while a larger down payment may reduce your mortgage rate, the minimum payment is usually 5%. This can give you an idea of how much you need for your mortgage loan and insurance premiums range from 0.60% to 4.50%, depending on the size and type of your mortgage.
As well, some lenders may require you to add it to your mortgage balance if they are offering you financing without interest or government charges. By making a smaller down payment, the government offers you financing without interest, but it’s still important to make your monthly payments on time in order to avoid any additional fees or penalties.
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.
Latest Vancouver Listings
Indian Arm freehold property in desirable Coldwell Beach at an attainable...
Gorgeous waterfront property on Eagle Island, West Vancouver with...
ATTENTION BUILDERS! 3365 Square foot level lot backing onto newly revamped...
Introducing a 2-bedroom suite that defines urban elegance. With an added...
Generously sized 2 bedroom and 2 bathroom apartment in the heart of Coal...
The Conservatory Luxury air-conditioned concrete large-size condo is the...
Autograph is a signature series of just 64 homes by renowned local...
Westside architectural excellence. The latest signature address behind the...
This breath taking 2 bedrooms + 2 bathrooms ocean view unit located in...
MODE presents this 565sf east facing 1 bedroom + flex home in River...
Welcome to the Legendary Woodwards W32. An immaculate and cozy 1 bedroom 1...
Welcome to the TELUS GARDENS - award-winning LEED gold architecture by...
Fabulous 2 bedroom, 2 baths + den, NE Corner suite at UPTOWN by Concord...
Lovely family home in this prime West Bay location. Gorgeous city and...
PENTHOUSE home in Wall Centre Central Park! STUNNING panorama views of the...
'The Arc' by Concord Pacific! The best 1 bedroom floorplan in the...
MODE presents this 1406sqft East facing 3bedroom+flex+3baths home in River...
A nicely updated unit with a spacious sized bedroom and 1 bath. The...
The Pinnacle, an Iconic building in the heart of Yaletown. This unit has...
South Vancouver simply affordable one-bedroom home features spacious...
Start your search with Richard Morrison, Top Award Winning Vancouver Realtor:
Contact Richard Morrison Top Vancouver Realtor today to find a Vancouver real estate and Vancouver condos for sale. This includes eastside residences and eastside apartment for sale. Also check out West Vancouver homes for sale or maybe an West Vancouver condos for sale. If you prefer North Shore, take a look at our listings in North Vancouver homes for sale and North Vancouver condos for sale.
Vancouver East Houses
| Collingwood Downtown East Fraser Fraserview Grandview Hastings Hastings Sunrise | Killarney Knight Main Mt Pleasant Renfrew Heights Renfrew South Van Victoria |
Vancouver West Houses
| Arbutus Cambie Dunbar Kerrisdale Kitsilano McKenzie Heights Marpole Oakridge | Point Grey Quilchena SW Marine Shaughnessy South Cambie South Granville University West End |
Vancouver East Apartments
| Champlain Heights Collingwood East Downtown Fraser Grandview Woodland Hastings Hastings Sunrise Killarney Knight Condos | Main Mount Pleasant VE Renfrew Heights Renfrew South Marine South Van Strathcona Victoria VE |
