17 Mar Does a Larger Downpayment Guarantee a Lower Rate?
While it may seem like simple math, the truth of the matter is there are various factors to consider when estimating your monthly mortgage payment. While having a minimum of 5% down used to be the basic requirement, many people are entering the home buying market later in life in comparison to a few decades ago. While it seems sensible that entering the market with a 10 to 20% downpayment will automatically save you thousands of dollars, this isn’t always the case. John Antle Mortgages in Kelowna can help you negotiate the best terms and explain all of the fine print.
CHMC Mortgage Insurance Increasing this Month
As of March 17th, 2017, the Canadian Mortgage and Housing Corporation will be increasing premiums on the mortgage insurance they provide. Ironically, borrowers who have a 5% downpayment will be able to access mortgages with lower interest rates compared to borrowers with a 20% downpayment. While a larger downpayment definitely shortens the total amount you will be borrowing, it is the interest rates that are gaining all of the attention right now. CMHC states that the average homeowner will not feel this higher premium increase; citing that the average homeowner will have to pay approximately $5 extra a month on their monthly mortgage payment.
|Down payment between 5% and 9.99%|
|Increase to Monthly Mortgage Payment||$2.82||$4.70||$6.59||$8.47||$10.35||$15.98|
Based on a 5 year term @ 2.94% and a 25 year amortization https://www.cmhc-schl.gc.ca/en/corp/nero/nere/2017/2017-01-17-0830.cfm
Rates vs. Downpayment
Working with an experienced mortgage broker like John Antle will enable you to secure all of the facts prior to signing on the dotted line. It is vital for first time home buyers especially to take all of the transaction details into account. For example, spending your entire savings on the downpayment does not leave you the necessary funds for lawyers fees, property transfer tax and associated closing costs. Many people are unaware of the additional funds required to purchase their home. Do some stringent math ahead of time with the help of an experienced mortgage broker to ensure you are not left with any ugly surprises. Poor planning and spending the bulk of your money on the downpayment alone often leaves people having to secure a separate loan to cover the rest of their closing costs. Alternatively, you may end up looking for a property with a significantly lower purchasing price or smaller square footage.
High Ratio Mortgages vs. Conventional Ratio Mortgages
While many clients are fortunate to utilize a family inheritance or long term savings to achieve a 20% downpayment; the majority are not. With student loans and people attending school for longer periods of time, the average 5% downpayment remains the majority for first time home buyers. These high ratio mortgages require mortgage default insurance; typically included in the cost of the mortgage. Conversely, those who do have a 20% or greater downpayment are eligible for a conventional ratio mortgage. While this type of mortgage does not always require having mortgage default insurance in place; many lenders still make this a requirement in order to cover the costs of doing business. If crunching monthly mortgage payment and interest numbers gives you a headache; feel secure knowing that John Antle Mortgages is happy to break down the math on your behalf.
Take Advantage of Today’s Low Interest Rates
This is still a great time to secure some excellent interest rates. Call us today to go over your financial details. We offer a multitude of different mortgage products and are always happy to provide you with the most economical choices possible.
JOHN ANTLE MORTGAGES – KELOWNA’S MORTGAGE SPECIALIST
We specialise in offering mortgage solutions that go above and ‘beyond the bank’. This means we are able to provide flexible solutions at great rates, often better than what traditional banks have to offer. Working with a mortgage broker can open up your options, allow for potentially greater solutions for your situation. We work with a variety clients including first-time buyers, those looking to transition from renting to owning or renewing a mortgage, self-employed business people, as well as investors in rental and/or vacation properties.