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Your price range

How much do you have for a downpayment? Will you be able to repay your debts in the years to come? It’s crucial that you do all the calculations to choose a home that you’ll be able to pay and that makes it possible for you to carry out other projects.

1. Draw up your budget
2. Save your downpayment
3. Calculate your mortgage payments and how much you can spend on a home
4. Estimate start-up costs

1. Draw up your budget

It’s crucial to do all the calculations, based on your income and expenses, to find out how much you can afford to spend on a property.

2. Save your downpayment

When you get a mortgage, a minimum downpayment is required and the funds must come from your personal assets.

Minimum downpayment required

Generally, a mortgage requires a minimum downpayment of 20% of the lesser amount between the purchase price and market value of the property.

Main downpayment sources

• Savings accounts
• Deposit certificates and savings bonds
• Investment funds and RRSPs
• Money received as a gift, under certain conditions
• The value of the land on which you want to build a home, if you are the owner.

If you’re building your own home with the help of family and friends, your caisse may consider a portion of the value of their labour to reduce the amount required for the downpayment.

Home Buyers’ Plan (HBP)

You can borrow up to $25,000 from your RRSP (up to $50,000 per couple), tax free, to purchase a new or existing home with the Home Buyers’ Plan (HBP).

Savings by instalments

If buying a home is a medium- or long-term project, Regular Deposit Term Savings is an excellent way to help you save towards a downpayment. Funds are withdrawn from your personal chequing account and deposited directly to a savings account at the frequency of your choice. The funds add up faster than you think!

Getting a mortgage with a downpayment of less than 20%

If you need a mortgage greater to 80% of the property value, you are required by law to obtain mortgage loan insurance from the Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial Canada. The downpayment can then be as low as 5% or 10% of the property value.

The insurance premium varies according to the downpayment and must either be paid at the time of purchase or added to the mortgage amount.

3. Calculate your mortgage payments and how much you can spend on a home

The 2 golden rules of borrowing

• No more than 32% of the gross household revenue should go to cover housing costs (mortgage payments, taxes, heating, insurance, condo fees, etc.).
• No more than 40% of the gross household revenue should go to paying off all your debts (home-related costs, personal, auto and student loans, credit cards and lines of credit, etc.).

Example

To avoid becoming overcommitted financially, the family of John Homeworthy, whose gross annual income is $60,000, can afford $1,600 a month for home-related expenses and a maximum of $500 for other financial obligations, for a total of $2,100 a month or $25,200 a year.

Once you’ve finished your calculations, your Desjardins advisor may grant you a preauthorized mortgage. Knowing exactly how much you can borrow will make it easier for you to shop for a home.

4. Estimate start-up costs

Start-up costs represent 3 to 5% of a property’s purchase price. Notary fees, transfer taxes or “welcome tax”, evaluations and inspections all have to be considered in advance.

This tool will help you calculate and remember all of your start-up costs:

• in Quebec (PDF, 98 KB)
• in Ontario (PDF, 98 KB)