Your Ultimate Guide to Saving for a Down Payment and Understanding Mortgages in Canada

Your Ultimate Guide to Saving for a Down Payment and Understanding Mortgages in Canada

Owning a home is one of life’s most exciting milestones, but with the average Canadian home priced at about $650,000, starting your journey can feel overwhelming. At iMortgage Capital, we’re here to make the process easier by helping you understand mortgages and the tools available to supercharge your savings.

What Is a Mortgage?

A mortgage is a loan from a bank, credit union, or private lender that helps finance your home purchase, with the home serving as collateral for the loan. It’s a legal agreement between you and the lender, outlining payment terms, the interest rate, and other key details.

As a borrower, you'll repay the loan principal (the amount borrowed) along with interest over a set term and amortization period. In Canada, mortgages can be amortized for up to 30 years, with typical terms ranging from 3–5 years. At the end of each term, you can renew or refinance your mortgage based on your goals.

What Is the Minimum Down Payment in Canada?

The minimum down payment varies by purchase price:

• Homes $500,000 or less: 5% of the purchase price.

• Homes $500,001 to $1,499,999: 5% on the first $500,000, and 10% on the remainder.

• Homes $1,500,000 or more: 20% of the purchase price.

Example:
For a $750,000 home:

• 5% of $500,000 = $25,000

• 10% of $250,000 = $25,000

• Total down payment: $50,000

Note: As of December 15, 2024, homes priced under $1.5 million with a down payment of less than 20% require mortgage default insurance.

6 Tips for Saving for a Down Payment

1. Build a Budget Around Saving
   Use a portion of your paycheck for savings and adjust your spending to align with your homeownership goal. Not sure where to begin? Our advisors at iMortgage Capital can guide you.

2. Automate Your Savings
   Set up automatic contributions from your paychecks to grow your savings effortlessly.

3. Redirect Refunds and Bonuses
   Tax refunds, work bonuses, or other unexpected income can give your savings a boost.

4. Utilize a First Home Savings Account (FHSA)
   Contribute up to $8,000 annually (lifetime max $40,000), grow your funds tax-free, and withdraw without penalties for your first home.

5. Leverage Your RRSP
   Through the Home Buyers’ Plan, withdraw up to $60,000 from your RRSP, with 15 years to repay.

6. Maximize a TFSA
   Tax-Free Savings Accounts allow your funds to grow tax-free, providing flexibility to withdraw when needed.

How iMortgage Capital Can Help You

Buying a home doesn’t have to feel overwhelming. With the right mortgage plan and savings strategy, you can achieve homeownership faster than you think. Contact us to learn more about our mortgage solutions and how to make your dream home a reality.

Let’s get started today!