This article was originally published on RBC Discover & Learn and has been republished here with permission.
When buying a home, the purchase price is covered through two main financial sources: Your down payment and your mortgage. But how much do you really need to put down? The short answer is, it depends.
Here’s How it Works:
Price Tier: Up to $500,000
Down Payment Required: 5% of house price
Price Tier: $500,001 to $999,999
Down Payment Required: 5% of first $500k + 10% portion of house price above $500k
Price Tier: $1,000,000+
Down Payment Required: 20% of house price
What Does This Look Like in Practice? Read on to see required down payment calculations in action — based on your purchase price tier.
You need a minimum down payment of 5% of the purchase price. Regardless of home price, a down payment of less than 20% means you’ll require mortgage default insurance.*
Calculate It
Home Price $400,000
Down payment $20,000
Price Tier: Up to $500,000
5% x $400,000 (HOME PRICE) = $20,000 Down Payment
A common price range for “starter” homes in the Vancouver and Toronto housing markets.
Calculate It
Home Price: $750,000
Down Payment: $50,000
Price Tier: $500,001 to $999,999
5% x $500,000 + 10% x $250,000 (HOME PRICE) = $50,000 Down Payment
On a $750,000 home, you’ll need $50,000 for your down payment. This is based on 5% of $500,000, plus another 10% of the amount over $500,000.
So How Much More Do We Need to Put Down?
Increase in down payment required on a $750,000 home is $12,500 ($50,000 is the required down payment).
If you’re buying a home over $1 million in Canada, you’ll still need at least $20% down.
Calculate It
Home Price: $1,000,000
Down Payment: $200,000
Price Tier: $1,000,000+
20% x $1,000,000 (HOME PRICE) = $200,000 Down Payment
Average Home Prices
Metro Vancouver
Average Detached Home Price as of January, 2021: $1,576,8002*
City of Toronto
Average Detached Home Price as of January 2021: $1,301,0003**
This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.
This article was originally published on RBC My Money Matters and has been republished here wit...
This article was originally published on RBC My Money Matters and has been republished here wit...
How much can you afford to spend on a home? Use these tips to set a budget for buying your first home with advice for preapproval, pre-qualification, and financial planning, and more, so you can buy your first property with confidence.
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