The Down Payment
The mortgage covers the amount of the purchase price that remains after you make your down payment, which will be a minimum of 5 per cent of the purchase price. Your deposit, which is an advance payment of part of your down payment, is paid at the time of signing the Agreement of Purchase and Sale while the remainder of the down payment is paid at the time of closing.
The higher the down payment, of course, the less you have to borrow and the less interest you will pay over the years. Saving for your down payment well before you enter the housing market is a wise course of action.
The federal government offers a helping hand with its RRSP Homebuyer’s Plan that allows individuals to use up to $20,000 ($40,000 for couples) of their registered retirement savings for a down payment on a first home. (Special rules may allow you to take advantage of this program every five years, so check with your financial institution or Canada Customs and Revenue Agency.) The amount has to be paid back into the RRSP over 15 years. You could think of this as an interest-free loan from yourself to yourself!
There are certain tax advantages to using your registered savings for this purpose, if you qualify. Details of the program can be found on the Revenue Canada Web site .
