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Down Payments

Depending on how much you have saved and whether you are being supported with a gift from the bank of mom and dad, what you are able to put towards a down payment will vary. In Canada, the minimum down payment is 5% of the purchase price, however there are also benefits to putting down over 20%.

Before the creation of the Canadian Mortgage and Housing Corporation (CMHC), the minimum, 20% down was a major barrier to many Canadians wanting to purchase a home. To combat this barrier and encourage home ownership, CMHC began offering mortgage default insurance; if you default on your payments, they will reimburse the lender. They charge an insurance premium on mortgages offer by lenders with smaller down payment and lower interest rates. This premium, of course, covers any losses they may incur if a mortgage default does occur.

So, why put down a larger down payment? Your mortgage amount will be less, payments smaller, and less interest paid over the life of your mortgage. With over 20%, you will save money by not having to pay any mortgage insurance premiums. Between 5% and 20%, the more money down, the lower the insurance premium.

It is also important to make sure to account for closing and other unexpected costs, so completely draining your savings towards a down payment is not the best course of action.

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Bank vs Credit Union Lenders

Bank vs Credit Union Lenders. Both banks and Credit Unions are financial institutions that have similar financial offerings. However, what they can offer in terms of mortgages are quite different. Banks are publicly listed and regulated by the federal government. Credit Unions on the other hand, are locally based organizations regulated by provincial government. When determining which mortgage lender to choose. It is important to consider the pros and cons of each type of institution. Banks, mortgage companies, and credit unions all offer different services and rates which should be considered when deciding on the best mortgage choice. Banks are typically larger institutions that provide a wide range of financial products and services, including mortgages.

Bank vs Credit Union Lenders

Because Credit unions are not regulated the federal Office of the Superintendent of Financial Institutions.  Thus, they are often not subject to the mortgage lending rules. Of course, Credit Unions do not come without any downside. As a result of their provincially based operations, they do not offer the ability to port a mortgage to a different province. Credit Unions offer mortgage services for Canadians that may be outside the realm of other mortgage lenders. As such, they are exempt from federal mortgage lending rules and regulations, allowing them to provide more flexible qualification and lending options. This greater flexibility does come at a cost though – credit unions typically charge higher interest rates than traditional mortgage lenders.

It is important to consider your unique situation and needs and weight the pros and cons when comparing lenders. Contact Prime Mortgage Works today.