Before you start your search for a home, you need to know how much you can afford. You would typically meet with a mortgage adviser and be asked to fill out an application. Based on your income, credit report, debt and savings, you would be pre-approved for a certain amount.
You will need a minimum of a 5% down payment of the purchase price of the home.
If the home is >$500,000, you will need a 10% down payment for that portion over $500,000 and less than $1,000,000.
If the home is $1,000,000 or more, a 20% down payment is required.
If your down payment is less than 20% of the purchase price of the home, your mortgage will need to be insured by the Canada Mortgage and Housing Corporation (CMHC).
When you are actually ready to submit an offer on a property, that offer is accompanied by a deposit, which demonstrates your commitment to the seller of the property, that you intend to go through with the purchase. The amount of the deposit can be negotiated, much like the price of the house and the closing date.
In Toronto, a 5% deposit is common place. As you move further away from Toronto, smaller deposits are typically acceptable. The amount of your deposit is part of the overall down payment. Although these amounts could be the same, i.e., 5%, usually the down payment is larger than the deposit.
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