Current Events, Personal Finance

How Does Down Payment Impact Monthly Mortgage Payments?

Note:  I am not affiliated with any companies that are listed in this blog post.  I was searching for mortgage information and Ratehub.ca happens to be the most thorough.  

As my move-in date to my condo is fast approaching, I have to think about whether the amount of down payment affects my monthly mortgage payments.  I do not want to use more than 35% of my monthly income to pay off my mortgage as I have a life other than paying for my condo 

In addition, I want to make sure I can afford a mortgage to begin with with the introduction of the new stress test starting this year.

As a result, I went onto Ratehub.ca and see what options I have out there.  I assumed I would get a fixed rate 5-year mortgage with amortization of 25 years as this is the most common mortgage people get.

Pursuing this further, I used the current average condo price of $515,816 CAD as “Home Price” as this is the price first-time home buyers should aim for now if they want to buy a decent property.  Furthermore, I used 20% as “Down Payment” because this is the minimum required to avoid paying mortgage loan insurance.   Here was what I generated:

Screen Shot 2018-01-27 at 2.55.40 PM

OH MY GOD!  Even with the cheapest mortgage you have to pay close to $2,000 CAD of mortgage each month.  Let me increase the down payment to 30%:

Screen Shot 2018-01-27 at 3.00.31 PM

Although the monthly mortgage payment has decreased more than $200 CAD in general, it is still a lot of money as the average wage for Canadian employees was $986 a week or just over $51,000 a year.

So what if I increase the down payment to 70%?

Screen Shot 2018-01-27 at 3.10.09 PM

I think this down payment amount is ideal as you pay less than $1000 CAD for your mortgage each month.  However, you would need to come up with at least $360,000 CAD.  It is going to be either you have rich parents or you are smart enough to start working at ten years old and SAVE.

No wonder a lot of first-time home buyers are not even thinking about buying a house in Toronto.

 

So are you currently planning to buy your first home?  How much are you planning to save up?  Where are you planning to buy?  Please leave your comment below!  Catch you on the flip side!

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