Clearing up how much you may need for the down payment on a property.
I get asked a lot about how much down payment you need to make a purchase. This depends on what you’re purchasing and how many pieces of real estate you already own. Anybody can buy a piece of residential real estate, with four units or less, by putting twenty percent down. That’s the standard, conventional loan. Nobody needs any explanations, and you can get up to 80% financing, assuming you can qualify for the loan.
When we’re looking at initial purchases, we can buy single-family homes, condos, and duplexes with as little as 5% down. You can also buy three- and four-unit dwellings for as little as 10% down. We call this an insured loan. There are three insurers in Canada, and each insurer will only allow you to insure one property. These insurers are there to help you get access to a property. They are not designed as investment vehicles. However, when you know what you’re doing, you can structure these acquisitions and get one per insurer.
Why is this important as a seller? When you have a property that you’d like to sell, and you’d like to open the market to as many buyers as possible, it’s important to know what down payment will be required by the buyer to get the highest offer.
“There are three insurers in Canada, and each insurer will only allow you to insure one property.”
What we see often in Montreal is a three-unit building that’s registered as a two-unit building or vice versa. When you have a two-unit building that can go as low as 5% down, you’re now opening up the number of buyers that can purchase your property. If a two-unit building is registered as a three-unit building, the bank will only allow 10% down, thus shrinking the number of buyers available to buy this property.
If you have any questions, please don’t hesitate to email, text, or call me at mathieu.pregent@century21.ca or 514-917-6284. I’d love to hear from you and answer your questions.
