How Much is a Down Payment on a Condo?
Down Payment Info For BC Properties
Written By: Mariko Baerg, REALTOR of Bridgewell Real Estate Group
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The down payment will form a part of the purchase price, and is an important step to know everything about when it comes to purchasing a condo.
This blog will help you calculate the minimum down payment on a condo for properties in British Columbia.
We will also go through other important down payment information to help you decide how much to put down.
Read for everything you need to know about down payments on condos!
Minimum Down Payment Requirements BC
The minimum amount of down payment that you will need to purchase a condo in British Columbia (BC) depends on the purchase price of the property. The breakdowns for each price category is as follows:
For homes with a purchase price equal to or less than $500,000:
The minimum down payment is 5%.
For homes with a purchase price greater than $500,000 and less than $1,000,000:
The minimum down payment is 5% for the first $500,000, and 10% on the remaining balance (portion of the price above $500,000)
For homes with a purchase price equal to or greater than $1,000,000:
The minimum down payment is 20% on the total purchase price
If you are purchasing the property as an investment property:
The minimum down payment for investment properties is 20%, regardless of the purchase price amount
An example of minimum down payment on a condo
Example 1:
Purchase price: $480,000
Minimum down payment calculation: 5% of $480,000
Minimum down payment total: $24,000
Example 2:
Purchase price: $700,000
Minimum down payment calculation: 5% of $500,000, 10% of $200,000
Minimum down payment total: $45,000
Example 3:
Purchase price: $1,200,000
Minimum down payment calculation: 20% of $1,200,000
Minimum down payment total: $240,000
How down payment affects your mortgage
If you put down a small amount, your interest rate will generally be higher.
The less money that you put down towards the purchase price of the property, the more risky the lender views you. This typically means that to balance out the risk, the lender charges you a higher interest rate to obtain a loan.
Putting down less than twenty percent means you’ll be charged an insurance premium.
If you put less than 20% down, then you are considered to be a high-ratio mortgage and must be insured by a mortgage insurer. The purpose of mortgage loan insurance is to protect the mortgage lender in case you’re not able to make your mortgage payments, and you personally receive no benefit for paying this insurance other than being approved to obtain a low-down payment mortgage.
The insurance premium
The amount of down payment that you put down determines whether or not you will be charged an insurance premium on your mortgage. Mortgage default insurance is a premium that is charged if you are putting less than 20% down.
The amount of this premium depends on the amount that you are borrowing, as it works on a sliding scale. This means that the amount will be more if you put less down.
Usually, mortgage default insurance premiums range from 0.6% to 4.5% of the mortgage amount, and can be paid at the time of purchase or added to your mortgage and paid monthly.
It is important to note that mortgage loan insurance is not available if the purchase price of the home is greater than $1,000,000 or if the loan does not meet the mortgage insurance company’s standards. (i.e CMHC or Genworth rejects it)
If you are purchasing a property and putting less than 20% down, and the mortgage insurance company will not approve your mortgage loan insurance for that particular property then you likely will not be able to obtain financing.
How much should I put down for a condo?
At the end of the day, you should put down what you are comfortable with and what works within your affordability and needs. You’ll need to meet the minimum down payment requirements, but anything after that is up to you.
While a larger down payment will mean a smaller mortgage payment and less insurance premium, we’ve seen a number of buyers try their hardest to save up 20% down only to be priced out of the market by the time they have saved all that money up.
If the market is moving faster than your ability to save a large down payment, then you may want to get in sooner rather than later and bite the bullet on the insurance premium.
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If you’re looking to purchase a property and would like guidance on how to get the ball rolling, then give us a call. We’re happy to walk you through the process so that you have a clear idea of how to purchase a condo from the start. Start a conversation by calling 604-765-0376. Prefer text? 604-319-0200 or email [email protected] to start a conversation. We’re here to help.
