Hey guys

I decided Im gonna set up a savings account finally and start putting money away for a down payment on a house. (looking at buying in a year or so).

How much do you think would be a good down payment on a $250 000-300 000 home?

I've heard before that first time home buyers can get away with 5% down in some cases, Would 10-20% down make a large difference in the end? Or maybe wait another year and put more down? Or would it be better to put minimum down and buy sooner? I know real estate prices are gradually increasing, and it seems the sooner you buy the better price you will get.

I know there are alot of people smarter than me reading this forum so I figured it wouldnt hurt to get some opinions.

Cheers!

The more you put down the better.

If you're putting down less than 25% you will be paying additional for mortgage insurance through the CMHC.

These are the rates for each bracket.
How much does it cost? | CMHC

Personally I'd say put down at least 15-20% of the house value. That's a personal choice though. You can do less but the CMHC will rape you.

If you have 8% wait until you have 10%. This is because you will pay much more in CHMC insurance under 10%. If you have the bucks go nuts and put down 25% then you pay nothing at all. (for insurance anyway )

As far as prices increasing, the boom is over. I've seen houses sit with a for sale sign for months. Gone are the days of buying in a new developement and by the time you move in you already made 30k.

These kind of questions may be worth asking the real estate people - this is all they do

^^ good advise above.... remember.. the payment to CMHC (or other mortgage insurance companies) .. . works with a 5% rule... .the percentage you must pay for your mortgage insurance changes at those 5% intervals... the more down.. the less paid for the coverage.

... if your a first time home buyer.. consider this..... don't just save for a downpayment...

save in RRSP's for a downpayment..

you deduct the amount invested per year from your income for income tax... your money grows (hopefully) in that investment and the interest is income tax defered.. (that's a good thing)... and you can use it towards your downpayment... without calling it "income" (generally, pulling funds from a RRSP, you have to count that amount as income for your taxes).

you then have 15 years to pay yourself back.... ( 1/15th of the borrowed amount per year)

you don't even HAVE to pay it back.. but beware 1/15th of what you borrowed from your RRSP will count as income for the year you did not pay it back ... and you have to pay income tax on it. (its in your best interest to pay it back)

catch my drift? ... clear as mud?

Originally Posted by Little_Dragon

save in RRSP's for a downpayment..

<-- this was me when i got my tax return back this year...

Aim to put down at least 10%... that is your best marginal bang for the buck unless you can come up with 20% or 25% down.

If this is your first home, leverage RRSPs since you are allowed to take a lump-sum tax free on the purchase of your first home.

Keep in mind however that you can need $5000 - $10000 in closing costs... lawyers fees, perhaps paying for upgrades in cash so as to not carry it on your mortgage, etc.

This must be an exciting time for you... once you get a foot into the real estate market you are pretty much set since from then on you will be building equity and any time you sell you should and will make profit.

Make sure that you shop around for mortgage rates too... best to use a broker but also do your own DD. Go for the cheapest rate... do not fall for any of these "cash back" incentives on mortgages. They rape you on the rate even if it seems like a slightly higher rate... over the term of the mortgage that will outweigh the incentives.

Again, good luck!

^^ true!

beware of some mortgage brokers... I had a nightmare with one.

told me I wanted "this" plan... (I forget the particulars... it was years ago)... I said. NO I don't want that... I want something more like "this".

so, he went along telling me about something... sounded much better to me at the time and I almost signed but ... of course, something big like this is good to sleep on.

so... on my drive home I thought about it.... he described the same plan he originally wanted me to get into.... just in words that sounded better to me. *Prick... trying to trick me*... suppose if he sells enough for that lender.. he gets a trip or some incentive.

... so I didn't deal with him anymore... at that time not many could compete with ING and other simillar institutions anyway.

Be smart.. and sleep on any major paperwork that needs signing... read the fine print. Don't let anyone bully you into signing something... the paper can "always" be signed the next day.

Originally Posted by 2point2

<-- this was me when i got my tax return back this year...

x2 and I didn't even claim my RRSPs this year. You can actually save them up and claim in a later year.

save as much as possible (thru RRSP's is a good way) and put as much down as you can.
10% is a good start

being completely out of debt will help too.

Originally Posted by Silverstoned

If you're putting down less than 25% you will be paying additional for mortgage insurance through the CMHC.

A PC Financial representative told me (10 min ago) that this was lowered to 20% as of today.

now they just need to raise the 20k on the RRSP programs.

Anybody have a variable interest rate mortgage? Might want to check this out.

Existing home sales pace, prices fall again in March - Apr. 24, 2007

And so it begins...

^^ that article is about a different market area.... but yets, building has slowed some... but in actuallity it is more "normal" now. We have had a boom in building the last 5 years... now we're just slowing to more normal growth. Hopefully prices will stablize a little... (and mortgage rates stop rising)

Originally Posted by 2point2

being completely out of debt will help too.

That reminds me... get rid of your credit cards if you have more than 2... that's too many.

One Visa, one mastercard is good.. and then call them if your credit rate is high. Keep it around 5,000 is best for new home buyer.

The reason is... the amount of credit available to you counts as potential debt in the lender's eye.

(Man.. I should do as I say and get rid of some of my credit cards... I got good advice, I just need to follow it myself now)

Good Luck, keep learning!

Originally Posted by Little_Dragon

^^ that article is about a different market area.... but yets, building has slowed some... but in actuallity it is more "normal" now. We have had a boom in building the last 5 years... now we're just slowing to more normal growth. Hopefully prices will stablize a little... (and mortgage rates stop rising)

Oh, I'm aware of that. I just think that article will be pertinent in the near future. I keep hearing about more and more people who're having their houses forclosed (sp?). Also, talk in the mortgage sector is that we'll see an interest rate hike fairly soon, which inevitably will make for more forclosures or have people selling their houses at a loss. We keep hearing (for about the past 2 years) about how the bubble is going to burst, I think we're almost there.

The US is heading towards a major recession, they've been putting it off with the war on Iraq which is pretty much being funded on the tabs of foreign countries (see China). I think Canadians will feel this too, economically speaking that is.

Although, again, this is just my opinion from what I see and hear. It's very tough to predict the economy.

I hear ya!... and I'm nervous about that as well.

My mortgage is currently variable (which was the way to go) Now though, it just scares me cause everytime it changes.. it changes upwards. (2004 = 3.4% 2007 = 5.2%) that 1.8% increase makes a huge deal in payments!

I'm considering going 10 year fixed at just under 6% (wish I locked in a few years ago)

Home

Check it out, Manulife Bank. Plenty of tips/calcs for you to play around with.