Mortgage Blog
Everything about 20% down Payment
January 16, 2025 | Posted by: Sarabjit Dhuna
Down payment is the amount that you use to purchase the house. There are mainly 5% and 20% down payment option to purchase house. 5% is excellent options to enter into housing market. 20% is also good options to have economic advantages. In 20% Down payment, it requires much more significant of the amount upfront however, it will give economic advantages.
Advantages of 20% down payment: -
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One of the Biggest advantages of 20% down payment compared to 5% down payment is that you don't need mortgage insurance (CMHC). For example, with 5% down payment you have to pay $19K in insurance if the house price is $500K.
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Another advantage for 20% down payment is that you are going to get low monthly payment. In addition, you also can get qualify easily for loans because of debt-to-income ratio is much lower.
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With 20% down payment, you can build equity faster than compared to 5% down payment. When you have good equity then you can buy property or just it for home improvement.
Disadvantages of 20% down payment: -
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One of the disadvantages of 20% down payment is that Saving period is longer for down payment for the house of $500K. It also leads property valuation can go high within that saving period.
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When you put large amount then also liquidity also goes down leaving limited funds for emergency use.
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