Down Payment Rules on Mortgages

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Down Payment Rules on Mortgages

We often get asked how much a down payment do I need for a mortgage or how much equity can I refinance out of my home. Well there are several different scenarios to consider. Here are some down payment rules on Mortgages.

Purchases
The minimum down payment required on an owner occupied purchase is 5% down regardless of how many homes you have owned. Whether you are buying your first home or your 10th home you are only required to put down a minimum of 5%. This down payment can come from your own cash, gift from family or can be borrowed from a loan or line of credit.

If you are looking to purchase a “second home” for family use the same rules above apply. The minimum down payment required for a second home is still only 5%.

For rental properties the minimum required is 20% – 25% down. Most lenders require 25% down so it is safe to use this as a general guideline.

Refinances
If you already own your home and want to take equity out of it then the maximum you can borrow is 80% of its’ current value. We do have some private lenders that will go as high as 85% but generally you are looking at a maximum of 80%.

Given this rule on refinancing limits your ability to leverage equity out of your home, if your situation is tight you may need to consider going as high as 95% on your purchase as later on down the road you won’t be able to draw equity out until you are under the 80% mark.

If you have any questions on down payment for your particular situation please give us a call and we will be happy to go over your scenario with you.

For more information on our mortgage products please visit our website at www.ymscanada.ca.

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About the Author:

Alex Kotai
Alex Kotai has worked in the mortgage lending business for over 10 years. His career started at HSBC Bank Canada where he spent most of his time in senior management roles which involved training and managing the sales staff at his branch. After leaving HSBC, Alex decided to open his own mortgage brokerage firm, Your Mortgage Source. Through his company, Alex has access to many lenders across the country with a very expansive list of products.