Lifestyle

Of Prime Interest: Options to cover a down payment

For most first-time home buyers, the most challenging aspect of buying a house is the down payment.

The two down payment mortgage options are a conventional mortgage, which requires at least a 20 per cent down payment, and a high ratio mortgage with the absence of a 20 per cent down payment requires mortgage default insurance.

While sometimes confused with creditor mortgage life insurance, which provides insurance protection for a mortgage holder in the case of their death, mortgage default insurance is an insurance which guarantees the mortgage by protecting the lender should the homeowner be unable to continue their payments for some unforeseen reason.

The insurance also provides the lender (your bank) with the flexibility to offer you the same competitive rates available to home buyers with a larger down payment. The mortgage premiums range from 1.75 to 2.75 per cent of the mortgage amount based on down payment. These mortgage premiums are paid once and are added to the principal balance of the mortgage.

As an example if you are purchasing a home for $400,000 with a five per cent down payment your mortgage amount would be $380,000 after down payment.

The 2.75 per insurance premium would be $10,450 would be added to your mortgage amount.

In the same instance if you were to put 15 per cent down, the premium would be reduced to $7,000. If you were to refinance your mortgage at any point, provided the mortgage with the refinance is still high ratio, you are only required to pay a top up insurance premium on the amount you are increasing.

It is to their benefit to try and work with homeowners and offer solutions when a financial hardship occurs rather than start a foreclosure proceeding.

 

We encourage an open exchange of ideas on this story's topic, but we ask you to follow our guidelines for respecting community standards. Personal attacks, inappropriate language, and off-topic comments may be removed, and comment privileges revoked, per our Terms of Use. Please see our FAQ if you have questions or concerns about using Facebook to comment.

You might like ...

Burtynsky and Carr exhibition at the Kelowna Art Gallery
 
Davis: Last of Tolkien’s Hobbit series in cinemas
 
Green Party deputy leader challenges hunting regulation changes
Hydro power switched on in the Iskut area
 
Marilyn Manson fans line up at SOEC
 
Penticton author featured in Chicken Soup series
Registration opens for music festival
 
Rock star Booked! at the Fernie Library kicks off literary series
 
Virk shuffled to new job after Kwantlen flap

Community Events, December 2014

Add an Event


Read the latest eEdition

Browse the print edition page by page, including stories and ads.

Dec 19 edition online now. Browse the archives.