How Much is the Down Payment for a House in Alberta?
Are you tired of spending a chunk of your income on monthly rental payments? Is your family growing and in need of more space? Then it may be time to start looking for a house!
If you're buying a house in Alberta, you'll need to make a down payment. A down payment is an initial amount that you pay for your home (your mortgage covers the rest).
However, there are a handful of rules that buyers should know about making a down payment on a house in Alberta. For instance, the minimum size of your down payment is influenced by the property's value.
START A QUOTEContinue reading to learn more about making a down payment in Alberta.
What is the minimum down payment on a house in Alberta?
As mentioned earlier, the minimum size of a down payment on a house in Alberta depends on the value of the home.
As a rule of thumb, more valuable homes require a larger down payment, whereas less expensive homes require smaller down payments.
Here's a breakdown of the minimum down payments for homes in Alberta:
Less than $500,000 — Buyers need to make a minimum down payment of 5% of the home's value.
Between $500,000 and $1,000,000 — Buyers need to make a minimum down payment of 5% on the first $500,000 and 10% on the rest of the home's value.
$1,000,000 or more — Buyers need to make a minimum down payment of 20% of the home's value.
Even though these are the minimum requirements, most real estate experts urge buyers to wait until they can make a 20% down payment on their future home, regardless of the value. Making a larger down payment on a home will give you additional equity in the home and will allow you to avoid getting mortgage loan insurance.
What is mortgage loan insurance?
Mortgage loan insurance is a unique type of coverage that financially protects the mortgage lender and is paid for by the lendee (i.e. the home buyer). Mortgage loan insurance costs anywhere from 0.4% to 4.5%, depending on the value of the property.
In Alberta, you need to get mortgage loan insurance if you do not make a 20% down payment on your home. Additionally, you may be required to obtain mortgage loan insurance if you have a weak credit score or are self-employed.
How much down payment for a house in Alberta if you don't want to pay for mortgage loan insurance?
As a reminder, you do not need to get mortgage loan insurance in Alberta if you make a 20% down payment on your home.
What is the average down payment on a house in Alberta?
In Alberta, the average down payment for a home is approximately 20% — this is roughly 6% lower than the national average.
Although it's hard to pinpoint the reason, one can imagine that it's partially due to the fact that the home value in Alberta is slightly below the national average, thus, giving buyers less of a reason to pay more upfront
First time home buyers Alberta down payments incentive
The first time home buyers incentive is something that Albertans should be aware of. This fantastic incentive is a government-sponsored shared equity mortgage that provides a variety of perks for first time home buyers in Alberta. Some examples include:
- Up to 10% for a first time home buyer's recently built home
- 5% for a first time home buyer's pre-existing home
- 5% for a first time home buyer's resale or new manufactured/mobile home
Taking advantage of the first time home buyers incentive in Alberta can make buying your first home more manageable, as it lessens the burden of saving for a down payment.
Three tips for saving for a down payment on a house in Alberta
Before you start chatting with real estate agents and searching for popular neighbourhoods online, you must ensure you've covered the essentials, like saving up for your down payment.
However, even if you're planning on making a 5% down payment on your future home, chances are, it's going to be a considerable amount of money. Not to mention, you'll have to be able to cover the other costs associated with buying a home, like home insurance.
That's why it never hurts to learn a few tips and tricks for saving for a downpayment for a home in Alberta.
Some tried-and-true tips include:
- Set a strict budget for yourself — Setting a tighter budget for weekly or monthly spending can help you save a significant amount of money over time. Make a list of essential expenses that you need to pay and a list of luxuries that you can treat yourself to once in a while.
- Automatic cash transfers — Modern banking tools have made it easier for prospective buyers to deposit a set amount from each of their paychecks automatically. Automating the process makes it practically effortless to make consistent deposits into your savings account.
- Supplement your income — Do you love driving? Why not earn some extra cash by working for a car-sharing company in your spare time? Do you have a knack for installing winter tires? Start a small, seasonal business to generate some extra income! All you need to do is assess your skills and get creative.
After you've saved up enough money for a down payment and are well into the home buying process, you can use an insurance brokerage, like Surex, to save on home insurance in Alberta.
Save up to 25% on home insurance in Alberta with Surex
At Surex, we do things a little bit differently.
Instead of pairing you up with the first team member available, we match you with your very own Surex insurance advisor. Your advisor can help you compare insurance quotes from some of the best home insurance companies in Alberta.
Contact us over the phone or online to learn more about how we can help you find the best home insurance in Alberta and how you can save up to 25% when you bundle your home and auto policies with one of our providers!
