New member

[Warren Lee]

Hi all,

I'm new to real estate, i have an accepted offer and it's my first deal. 

I have a question for all you pros,

When you put a down payment on a home is it better to put as little money down as possible or should you down the required amount? 

In Canada, if you down less than 20% you get hit with the CMHC.

My deal 

Property 300,000

      Down 10%

      CMHC Property now 330,000

BUT if i only down the 10% i can purchase another. Is it better to have two properties for the same amount that I'm going to down for the one property? Your thoughts. 

Thanks all

[Roy N.]

@Warren Lee

Welcome to BP!

 The answer depends largely on the purpose of the "home".   If you are purchasing your own home (primary residence), you will be paying your mortgage interest out of after tax dollars and thereis a compelling argument to make a larger down payment (if possible) and avoid the mortgage insurance (CMHC or Genworth).   The decision will be based upon your personal situation and your opportunity cost (i.e. to you have a better use for the amount of funds needed to bring your down payment from 10% to 20% that will produce a better {after tax} return than avoiding the mortgage insurance).

If you are purchasing the property as a rental, then your mortgage interest is a business expense and it may make sense to take the high ratio mortgage (10% downpayment) provided the property still cash flows with the extra leverage.

If you do elect to go with the 10% downpayment and plan to purchase two properties, discuss this with your mortgage broker / lender first to make certain you will be able to have two high-ratio mortgages.   CMHC policy only permits a borrow to hold one CMHC insured residential mortgage at a time {though not every lender enforces this and CMHC does not always police/catch it}.  This would mean your subsequent purchase with a 10% downpayment would need to be insured through Genworth or Canada Gurantee if they are still operational.