Your Questions Answered
What is the minimum down payment I need to purchase a property?
This answer isn't as simple as most people think-- there are many variable that can influence this:
Principle Residence vs. Rental Property
When purchasing a principle residence that is under $500,000, your minimum down payment is 5%.
If you purchase a property between $500,000-$1,000,000, your down payment will be 5% on the first $500,000 and 10% on the remainder (ie. a $900,000 home would require a minimum down payment of $65,000).
If you're purchasing a principle residence that is greater than $1,000,000, then you would require at least 20% down.
Rental properties in general require a minimum down payment of 20%, regardless of the purchase price.
Purchase Price and Geographic Location
All lenders have what's called a "sliding scale", which impacts your minimum downpayment on any purchase typically over $1-2, and is based on the geographic location of the property. For example, most lenders allow a minimum 20% down on a purchase up to $2,000,000 in Vancouver (with 30-50% down on the amount above $2m), while Abbotsford is typically 20% down on a purchase up to $1,000,000 (with 30-50% down on the amount above $1m).
What is the difference between an insured, insurable, and uninsurable mortgage?
An insured mortgage, is a mortgage that has mortgage default insurance (CMHC, Genworth, Canada Guaranty). It is a requirement by the Government of Canada, that any mortgage where the borrower is putting less than 20% of the purchase price down, must pay mortgage default insurance. This insurance compensates the lender in the event the mortgage goes into default. A mortgage can only be insured if it is your principle residence and the purchase price of the property is less than $1,000,000; therefore, if you buy a home worth more than $1,000,000, you are required to put down at least 20%. These mortgages have a maximum amortization of 25 years, and will be the lowest rates on the market since the risk is passed onto the insurers.
An insurable mortgage, is a mortgage that meets all of the parameters of an insured mortgage, but the borrower does not pay the insurance premium; in this case, the lender pays the premium.
An uninsurable mortgage, is a mortgage that falls outside of parameters of an insured mortgage. If you have at least a 20% down payment, and your purchase price is greater than $1,000,000 and/or you chose an amortization greater than 25 years, it is deemed "uninsurable." With these mortgages, we have greater flexibility as we are tailoring the file to a specific lenders policies, rather than lender and insurer policies. When it's uninsurable, we can also look into Alternative financing (B and Private), if necessary. Rental properties cannot be insured, and therefore are always uninsurable.