Saving for a Down Payment

down payment minimum

Mortgage Down Payment

Today’s mortgage market allows potential homeowners to purchase their dream property in Canada with as little as five per cent down.

Any down payment that totals less than 20 per cent of the property value will require mortgage default insurance, and is considered to be a high ratio loan.

A conventional mortgage is defined as a mortgage loan where 80 per cent or less of the property value is financed through a lender. The percentage of your home value that is financed, or not paid for by the down payment, is defined in a Loan to Value ratio (LTV) (loan amount divided by property value). The LTV has a large influence on the mortgage product you will be eligible to qualify for on the purchase of your new property.

The greater the down payment you can accumulate, the greater the contribution you are making toward the principal value of your home, and thus the less of the mortgage loan amount you will be paying interest on over time.
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Canadian housing becomes more affordable

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Thanks to the continuation of ultra-low mortgage rates, Canadian housing became more affordable during the second half of 2012, according to RBC Economics.

Data shows that during the fourth quarter of 2012, due to low mortgage rates and less buyer demand, home affordability increased for the second consecutive quarter. RBC Economics also projects that this trend will continue throughout 2013.

"Exceptionally low interest rates have been the key factor keeping home affordability from reaching dangerous levels in recent years," RBC chief economist Craig Wright said. "Residential property values are elevated in Canada and, for many households, ownership remains accessible only because of rock-bottom mortgage rates. It could be a different story if interest rates were to move swiftly and significantly higher."

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Programs for affordable housing

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Regardless of how low mortgage rates remain, buying a home is still a large financial responsibility. Between the expense of home loans and closing costs, not to mention renovation and maintenance, it’s important to make sure you’re taking advantage of every opportunity to save. Fortunately there are a number of programs geared toward helping Canadian home buyers find an affordable deal.These are not the only programs available to home buyers looking to save money, but they are some of the most popular. For Canadians looking to make the home buying process more affordable, the smart move would be to research all your options when it comes to qualifying for special programs and rebates. Finding one that suits your needs can result in significant savings.

Home Buyers’ Plan
The Home Buyers’ Plan allows Canadians buying their first home, people with disabilities, or people buying on behalf of someone with disabilities, to take money out of their registered retirement savings plans in order to buy or build a qualifying home. The amount that can be withdrawn goes up to $25,000 per calendar year. This program allows borrowers to take out the money without having to pay tax at the time. Typically, the money must be repaid over the course of no more than 15 years, with a certain amount repaid into the savings plan each year until the balance is zero. Continue reading

Canadians turn to RRSPs for safe investment option

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Amid global financial turmoil, many Canadians are seeking the calm certainty of conservative long-term investments, a new survey reveals.

Canadians are still investing despite the tumult in places like the United States, Greece, Spain or Italy, and they're doing it at twice the rate of a year ago, according to a review from Royal Bank of Canada Branch Investments. But rather than seeking more bang for their buck, Canadians are diversifying into longer term mutual funds, guaranteed investment certificates and investment savings accounts.

Tax free savings accounts and registered retirement savings plans are getting more attention from Canadians as they return to investing basics, according to RBC. Traditionally, Canadians have poured money into their RRSPs during a seasonal two-month period, but lately they have been making regular contributions throughout the year, notes Michael Walker, vice-president and head of Branch Investments.
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More than half of Canadians feel financially unprepared for retirement

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More than half of Canadians don't feel financially prepared for retirement and only one-third have a detailed retirement plan, according to a recent study by ING Direct.

Fifty-eight percent of survey respondents deemed themselves unprepared for post-work life, while only 33 percent said they have a financial strategy for meeting their specific retirement goals. Meanwhile, saving for retirement is unimportant to many Canadians, as 31 percent said they don't include it when thinking about their personal finances, the survey revealed. Continue reading

Economic conditions limiting RRSP investments among Canadians

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It's a common goal to save as much for retirement as possible, but many Canadians are finding it increasingly difficult to invest after paying for basic living expenses.

According to a recent report by The Canadian Press, more than 60 percent of Canadians say they don't have enough finances to invest after paying for living necessities, and some have trouble saving the required funds.

"For a lot of people in order to make an RRSP contribution they're going to have to make some real sacrifices – a vacation, delay buying a car or making improvements to the house or to a cottage," said Dave Ablett of Investors Group, as reported by the source. Continue reading

Investing for Young People Part 3: Differentiating Mutual Funds

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Perhaps jumping into the stock market has turned out to be more of a chore than you and your child anticipated. If savings bonds and GICs are not offering the rates of return you and your child would like to see their savings yielding, mutual funds are a promising alternative.

At current Canadians have well over 1,200 different mutual funds to select from. How do you know which is right for you? Here is some general information on the various types of mutual funds available in Canada.

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What is TFSA: Why Canadians should be Investing Tax-Free

How will the Canada Tax Free Savings Account Guard your Retirement Funds?

Registered or unregistered – that seems to be the question as Canadians plan and gear their savings and investment accounts toward retirement. Most experts advise that your investments gain a return in excess of two per cent in order to beat annual inflation. In addition, there are several tax strategies you should keep in mind as you allocate your investment dollars to specific accounts.

The Canadian Tax Free Savings Account (TFSA) allows for tax-free earnings off investments with aggressive return potential, yet only half of Canadians are utilizing this account – why is that? H&R Block suggests there are several myths acting as hurdles on the path to earning tax-free investment income. Continue reading

Debating mortgage and RRSP contributions

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A recent article in The Star Phoenix analyzed which account Canadians should focus on first, debating between mortgages and registered retirement savings plans.

The first important factor to consider, the article relays, is whether an individual's RRSP growth rate can exceed their mortgage interest rate. Online calculators an help determine this by plugging in different scenarios, such as age, mortgage balance and interest rates. Continue reading

Baby Boomers redefining their retirement

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A recent article in The Calgary Herald explained that many Baby Boomers are currently redefining financial planning as they approach retirement.

The article states that Canadians mainly rely on three main streams for retirement funds – the government through the Canada Pension Plan and Old Age Security, a pension plan or group RRSP and their own savings.

"Baby Boomers typically are redefining their retirement – often it's a matter of slowing down or looking at other opportunities where they can apply their expertise and talents," said Sterling Rempel, certified financial planner. "And that could very well generate income for them."
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