Down payment on first home, how important is it to have 20%?

[Twin_Cam_Turbo]

Unfortunately my town home is moving along faster than expected and will be done 2 months sooner than I had planned, originally I was going to have my 20% saved up and ready to go but now I'm looking closer to 15-16% total to put down.

Is it possible to get a slightly better interest rate with 20% plus down payment?

I feel like I'm stressing myself over this and I have to decide whether to become a hermit for the next few months and save every penny or to continue on how I am now.

[Sugarphreak]

...

[eblend]

Well with less than 20% you have to do the whole CMHC thing which blows. I never had to deal with it but my friend did, and I belive it carries on until you pay off the whole morgage, but not sure.

Why not just borrow whatever you need, reach the 20% and not worry about it?

I obviously don't know the cost of your home, but if its about 300k, 20% would be 60k...15% is like 45k, so unless you are making very good money, it would take you more than a couple of month to save up that extra 15k...

[ercchry]

you should have talked to a broker or bank prior to this point i would hope... ask them?

i would think your rates would be better if you need mortgage insurance since there is no risk to the bank at that point :dunno:

[Twin_Cam_Turbo]

Home is $256900 all in, and I've already got the pre-approval done, I haven't heard back from the Mortgage guy for a few days that's why I thought I would ask here about the interest rates.

[Sugarphreak]

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[roopi]

Well I'm pretty sure rate wise it won't make a difference. The major difference is the insurance you have to pay when below 20%. I say if you can do what it take to get the 20% down so you aren't paying the extra insurance. If you are putting 15% down I believe you are looking at an insurance premium of 2%.

[Twin_Cam_Turbo]

Originally posted by Sugarphreak
Sell me your car :poosie:

I will give you a 2004 Dodge SX2.0 with 80K on it in the exchange so you still have wheels, then you can go use it as a trade for an FR-S after you get your place.

win-win ;)

Haha if it comes down to it ill have to sell the car anyway and use that money for the down payment.

I already sold the ATV and trailer for $3000 so I don't have much else to sell other than TVs and Skis which are only with a few grand anyway.

[DeleriousZ]

So say someone wants a 400k house, and puts 5% down, what kind of cmhc insurance payments are you going to get stacked up on that?

[blitz]

Looking at the CMHC tables here (http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm)

You're looking at a 0.75% difference between putting down 15% and 20%.

So on 257k with 15% down that's $1600 extra.

[ercchry]

Originally posted by DeleriousZ
So say someone wants a 400k house, and puts 5% down, what kind of cmhc insurance payments are you going to get stacked up on that?

they are not payment, you have a flat rate of 2.5% of the purchase price.

you can either pay it all at once, or your first payments will go towards that before you start paying down your mortgage.

sot he "payment" route would be the same as if you put 2.5% down on the place

here is the table of cost

http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

[Disoblige]

Find a friend who can loan you 13k, and in 2 months pay him/her back + a little more for their troubles?

Hell, even I'd do it, but in 2 months I'd expect 14k, which IMO isn't that unreasonable.

Edit: Now that I think about it, asking a family member or friend is probably the easiest solution if you can indeed come up with 13k in a couple months anyways. I'm sure you'd find at least one person willing to do that.

[Darkane]

With 20% you also have the option for a 30 year amortization if you choose.

[Twin_Cam_Turbo]

Originally posted by Disoblige
Find a friend who can loan you 13k, and in 2 months pay him/her back + a little more for their troubles?

Hell, even I'd do it, but in 2 months I'd expect 14k, which IMO isn't that unreasonable.

Edit: Now that I think about it, asking a family member or friend is probably the easiest solution if you can indeed come up with 13k in a couple months anyways. I'm sure you'd find at least one person willing to do that.

Most of my friends owe me money :rofl:

My dad offered to loan me the money if needed but I don't know what kind of interest he is going to charge.

[BananaFob]

Keep in mind that the CMHC premium is added to the PRINCIPAL, so if it really is $1,600 (sorry, too busy to do the math right now), it's amortized over the 25 years. It's not that big a deal imo. If it's going to take you a whole bunch of effort to get that 5% to get to 20% down, you might want to consider that you're spending $64 + pennies in interest a year on the additional premium...

[Tik-Tok]

CMHC fees on a $256,900 property
20% down = $2055
16% down = $2158
15% down = $3821

#2 would looks the most ideal to me.

[Disoblige]

Your dad is going to charge you interest on a 2 month loan? lol..

Well, my offer still stands :P

[Disoblige]

Originally posted by Tik-Tok
CMHC fees on a $256,900 property
20% down = $2055

?????
I thought we're talking about loan insurance for not putting 20 down?

[Tik-Tok]

Originally posted by Disoblige

?????
I thought we're talking about loan insurance for not putting 20 down?

He was asking if he should scrimp and save for the next 2 months to have 20% to put down.

[blitz]

Originally posted by Disoblige
Your dad is going to charge you interest on a 2 month loan? lol..

Well, my offer still stands :P

You generous offer of a 45% annual interest rate? :rofl:

[Disoblige]

Originally posted by blitz


You generous offer of a 45% annual interest rate? :rofl:
Yeah :rofl:

[CD007]

Originally posted by Tik-Tok
CMHC fees on a $256,900 property
20% down = $2055
16% down = $2158
15% down = $3821

#2 would looks the most ideal to me.

How did you get those #s?

Did you look at the CMHC link above?

[JAYMEZ]

Well if your dad is going to lend you the loan , you will need to get a gift letter proving where it came from and that you DO NOT have to pay it back..

And with 20 percent down , your rates will not change from someone who puts down 5 / 10 / 15. Pre-approvals usually dont mean anything. I would lock a rate soon , they are about to go up in the next few days =)

[Stevo89]

I think some of the math being crunched out is wrong. Typically if you have a 20% down payment or more your lender does not require you to purchase CMHC mortgage insurance. So the difference between a 15% down payment and a 20% down payment is not 0.75% but actually 1.75%. It was stated before but I thought I would mention it again in case people glossed over it, but CMHC mortgage insurance is not a recurring cost, it is a one time cost that you can either pay now or pay over the entire ammoritization of the mortgage.

On a side note, I'm curious as to why you feel that interest rates will be going up in the next few days Jaymez?

[JAYMEZ]

Im a mortgage broker and this is what I have been told =P

[dj_rice]

Originally posted by JAYMEZ
Im a mortgage broker and this is what I have been told =P


Thanks for the heads up. I was trying to wait it out and see if I could get better than 2.79 w/ RBC but with what your saying. I'm locking in Monday.

:thumbsup:

[JAYMEZ]

^^ Thats a great rate :thumbsup:

[Twin_Cam_Turbo]

Shit I should probably lock in a rate then.

[Black Gts]

Also with the loan from your dad, if you have 90 days put in the account now and you will not need a letter.

[turbotrip]

Originally posted by JAYMEZ
Well if your dad is going to lend you the loan , you will need to get a gift letter proving where it came from and that you DO NOT have to pay it back..


What do you need this letter for?

[blitz]

Originally posted by Stevo89
I think some of the math being crunched out is wrong. Typically if you have a 20% down payment or more your lender does not require you to purchase CMHC mortgage insurance. So the difference between a 15% down payment and a 20% down payment is not 0.75% but actually 1.75%. It was stated before but I thought I would mention it again in case people glossed over it, but CMHC mortgage insurance is not a recurring cost, it is a one time cost that you can either pay now or pay over the entire ammoritization of the mortgage.

On a side note, I'm curious as to why you feel that interest rates will be going up in the next few days Jaymez?

The table includes CMHC fees to a 35% down payment, but it looks like they're only needed over 20% if your lender requires it. So if you're looking at 1.75% for 15% and 0 for 20%, it's a $3800 touch.

[ercchry]

Originally posted by turbotrip


What do you need this letter for?

if you have taken out a separate loan for your DP the payments will affect your qualifying amount as you now have more debt to payback

[Frankie88]

I think it depends on how difficult for a home buyer to save up this 20%,

1)If it takes you less than a year or 6 months to save from 10% to 20%, then it probably makes sense for you to rent and wait, unless you spot any good opportunities.
2)If it's difficult for you to save up the 20% or it might take a few years, it might be better to just pay 10%(which insurance premiums level/percentage capped at 5% 10% 15%, 10% is much better than 5%) 10% reduce you premium from 2.75% to 2.00% while 15% only reduce 2.00% -1.75%. and if you put another 5% make it up to 20% you save another 1.75%!
If you look at the premium table:

Up to and including 85% 1.75%

Up to and including 90% 2.00%

Up to and including 95% 2.75%

So if you really can't or very difficult to save up 20%, try 10%.

[turbotrip]

Originally posted by ercchry


if you have taken out a separate loan for your DP the payments will affect your qualifying amount as you now have more debt to payback

odd i've never come across this situation, we've used HELOC's for downpayments many times and the bank didnt care if it was in cash or came from LOC

[bmeier]

Originally posted by turbotrip


odd i've never come across this situation, we've used HELOC's for downpayments many times and the bank didnt care if it was in cash or came from LOC

heloc is backed up by an asset though. a loan theoretically is just straight debt and they have no collateral against that.