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Down Payments
Grow your down payment faster by saving or using your RSP.
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Saving for a Down Payment
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Using your RSP
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Mortgage Default Insurance
Down payment saving tips
A down payment is your key to becoming a homeowner. We have saving tips to help make it easy. Here’s how:
- Make it automatic.
A pre-authorized savings plan lets you pay yourself first. - Put it all together.
Put any bonuses, commissions, tax refunds, or cash gifts in a savings account. - Build a basic budget.
Our Down Payment Calculator takes the stress out of setting a budget so you can plan to save for your down payment. - Your RSPs.
You can use your RSPs to help with your down payment1
Your starting point: a little or a lot?
Should you buy a home right away, or wait and save as much as you can? Well, that depends.
Conventional mortgage
A conventional mortgage means you have a 20% down payment or more. You borrow the rest. When you make a bigger down payment, you pay less interest.
High ratio mortgage
If you have the cash flow to manage a mortgage loan, but not enough for a down payment of at least 20%, a high ratio mortgage can get you there. A high-ratio mortgage will require mortgage default insurance . The cost can be added to your principal amount or paid up front.
You can pay as little as 5% down for a house under $500,000. Homes that are priced between $500,000 up to $999,999 still allow for that 5% down payment on the first $500,000. The portion of the home price above $500,000 requires a down payment of 10%. You will need a down payment greater than 20% with a property priced over $1,000,000.
When you make a bigger down payment, you pay less interest. You may pay more interest with a high ratio mortgage because with a smaller down payment, you are borrowing more of the purchase price.
Using your RSP
As a first-time home buyer, you have the option of using your RSP funds toward your down payment1. For many people, that’s just the boost they need to afford their first home.
The RSP Home Buyers’ Plan
The RSP Home Buyers’ Plan allows you to:
- Withdraw up to $35,000, in a calendar year, from your RSPs for a home purchase (up to $70,000 for a couple).
- Repay your RSP over a period of no longer than 15 years.
If you’re considering this option, a TD Mortgage Specialist can discuss the pros and cons of using your RSPs to help you make a down payment.
Using your RSP for your down payment
Pros
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You can withdraw up to $35,000, allowing you to make a larger down payment.
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A larger down payment may help you avoid the need to purchase mortgage default insurance.
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A larger down payment typically means lower monthly principal and interest payments, making home ownership more affordable.
Cons
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You’ll be giving up potential growth of your RSP savings but will gain value in your home as it appreciates over time.
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You’ll need to repay the money you withdraw within 15 years.
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Failure to pay back the money you withdraw will have tax consequences. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer’s income.
At TD Canada Trust, we are required to make sure that our mortgage customers and the general public are told the facts about mortgage default insurance: what it is, when it is needed, how it is calculated, and other important details that affect homeowners.
What is mortgage default insurance?
It is a type of insurance that enables qualified borrowers to purchase homes with a down payment of as little as 5% (an additional down payment is required for Stated Property Values greater than $500,000). It also provides a "safety net" for federally regulated financial institutions like TD Canada Trust that lend out money on the security of residential real estate, and increases the number of Canadians who may be able to qualify for mortgages.
When to pay your mortgage default insurance?
When you are approved for a mortgage that requires mortgage default insurance, you have the choice of either paying the default insurance premium amount up front or adding it to the principal portion of your mortgage.
Mortgage borrowers can see the amount of their mortgage default insurance premium by looking at their TD Canada Trust Mortgage Loan Agreement. From time to time, the company providing the insurance may amend the calculations for the premiums. In that case, because of timing, this document may not reflect the most current percentages. However, your Mortgage Loan Agreement will always reflect the correct premium amount. Depending on your province of residence, you may be charged a provincial sales tax on the mortgage premium amount, which you are required to pay. As of June 1st, 2015 the following provinces charge a sales tax on the mortgage premium amount: Ontario, Quebec and Manitoba.
Financial institutions, like TD Canada Trust, that charge borrowers for mortgage default insurance must fully explain the coverage to mortgage borrowers, including who is protected by the mortgage insurance, and who pays for it.
At TD Canada Trust, we cannot lend our customers more than 80% of the value of their residential property unless the mortgage is insured against default. The borrower pays for this insurance (and any applicable sales tax).
Mortgage default insurance helps protect TD Canada Trust should a customer default on a mortgage. A mortgage is generally considered to be in default if a payment is not made on the scheduled due date, but there are other situations when a mortgage may be in default. If a property is sold as the result of a mortgage default but the sale does not generate enough money to pay the outstanding balance and all associated costs, fees and interest, the insurer will pay the shortfall to TD Canada Trust and will then have the right to enforce against each borrower personally for the deficiency.
Financial institutions that charge borrowers for mortgage default insurance must also explain how the insurance premium amount is calculated and charged.
At TD Canada Trust, we are required to provide specific information about mortgage applications to the companies that provide mortgage default insurance. This information is used by the mortgage insurer to calculate the premium amount that is charged to the borrower. This information includes:
- Stated Property Value
- Loan Amount
- Loan to Value (LTV) ratio
- Amortization Period
- Employment Status
- Source of Down Payment
The company providing the insurance will calculate the premium amount and inform us of the amount. We then pass on that charge to the borrower. In all cases, the default insurance premium amount charged to TD Canada Trust by the insurer, plus any applicable sales tax, is the amount charged to the borrower.
TD Canada Trust deals with three mortgage insurers ‑ Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada (Genworth) and Canada Guaranty Mortgage Insurance Company (Canada Guaranty). We do not receive any benefits or payments from any of these companies and we do not have any arrangements that require disclosure to borrowers.
Here’s how your insurance premium is calculated
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Mortgage information passed on to the insurer |
What it means |
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Stated Property Value |
Lesser of purchase price or property value, as provided by you |
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Loan Amount |
Amount you want to borrow: |
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Loan to Value (LTV) ratio |
The maximum LTV ratio for Stated Property Values over $500,000 is: |
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Amortization Period |
Time required to pay off the mortgage, assuming the same interest rate throughout the entire duration of the mortgage |
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Employment Status |
Employed or self-employed with third party income validation, or self-employed without third party income validation |
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Source of Down Payment |
Down payment is the amount of a purchase price that is not being financed by a security position on the subject property. The amount of down payment represents the borrower's equity in the property. Traditional source of down payment includes personal savings, investments (GIC, Mutual Funds, Stocks), and non-repayable gift. Non-traditional source of down payment includes unsecured personal loans, lines of credit, credit cards and loans from government agency. |
Default insurance premium rates effective for mortgages approved on or after March 17, 2017.
Up to a 25 year amortization period
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Owner-occupied properties with third party income validation |
Owner-occupied properties without third party income validation |
Rental Properties (2-4 units)2 |
Cottage Properties3 |
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|---|---|---|---|---|
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LTV Ratio |
Percentage charged on Loan Amount for employed/self-employed borrower with third party income validation |
Percentage charged on Loan Amount for self-employed borrower without third party income validation** |
Percentage charged on Loan Amount for employed/self-employed borrower with third party income validation |
Percentage charged on Loan Amount for employed/self-employed borrower with third party income validation |
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Up to 65% |
0.60% |
1.50% |
1.45% |
1.45% |
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65.01% - 75% |
1.70% |
2.60% |
2.00% |
2.55% |
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75.01% - 80% |
2.40% |
3.30% |
2.90% |
3.15% |
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80.01% - 85% |
2.80% |
3.75% |
Not available |
3.50% |
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85.01% - 90% |
3.10% |
5.85% |
Not available |
4.35% |
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90.01% - 95% |
4.00% |
Not available |
Not available |
Not available |
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90.01% - 95% and non-traditional source of down payment |
4.50% |
Not available |
Not available |
Not available |
If the principal amount of your mortgage is a result of combining an existing insured mortgage with additional borrowed funds, the insurance company will combine the information from the existing mortgage and use the premium table below to calculate the premium amount. The insurer may determine that a premium credit is available.
If the amount of your mortgage results from combining an existing insured mortgage with new money, then the insurance company will combine the information from the existing mortgage and use the premium tables shown here to calculate the premium amount. The insurer may determine that a premium credit is available.
Here are default insurance premium rates offered by insurers when there is an increase on the borrowed amount, and the original loan amount required mortgage default insurance effective for purchase mortgages approved on or after March 17th, 20176. The insurer may determine that a premium credit is available. This rate is charged on the new money:
25 year amortization period4
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Owner-occupied properties with third party income validation |
Owner-occupied properties without third party income validation |
Rental Properties (2-4 units)2 |
Cottage Properties5 |
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|---|---|---|---|---|
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LTV Ratio |
Percentage charged on increase to Loan Amount for employed/self-employed borrower with third party income validation |
Percentage charged on increase to Loan Amount for self-employed borrower without third party income validation |
Percentage charged on increase to Loan Amount for employed/self-employed borrower with third party income validation |
Percentage charged on increase to Loan Amount for employed/self-employed borrower with third party income validation |
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Up to 65% |
0.60% |
3.00% |
3.15% |
2.90% |
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65.01% - 75% |
5.90% |
6.50% |
3.45% |
6.10% |
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75.01% - 80% |
6.05% |
7.00% |
4.30% |
6.40% |
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80.01% - 85% |
6.20% |
7.50% |
Not available |
7.00% |
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85.01% - 90% |
6.25% |
9.00% |
Not available |
7.60% |
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90.01% - 95% |
6.30% |
Not available |
Not available |
Not available |
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90.01% - 95% and non-traditional source of down payment |
6.60% |
Not available |
Not available |
Not available |