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Discussion Starter #1
I am looking at purchasing a property (condo or otherwise) as a primary residence close to next fall so by about October 2009.

My question for those of you that already own properties, is how much did you put down and what must I watch out for?

Is there a real benefit to putting a huge downpayment down if I only intend to stay there for a few years and then sell it or make it a rental property.

Does zero down stilll exist in Canada? I see ads from realtors in Toronto saying I can put zero down still...what's the deal?
 

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- We put down 25% on our condo. As for anything to watch out for....I'm not really sure. I guess in our condo we looked at any particular rules that the board might have, an analysis of the reserve fund and how quickly they intend to raise the condo fees. Also know who your neighbors are. As well with a condo I would recommend buying a unit that is move in ready for you because major renovations in the a condo is a pain in the butt.

- I don't see any real reason why you wouldn't put as much down as possible on a mortgage no matter when you intend to sell it. The time you are there you'll have lower payments and pay less interest. You'll also avoid CMHC charges. I also think banks would give you better interest rates with a better down payment. The only thing I can figure is that you maybe wouldn't touch an emergency fund to add to the downpayment.

- I think they still have zero down mortgages for shorter terms. I think what they stopped doing was zero down 40 year mortgages but I could be wrong.
 

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These days you need 20% down to avoid paying mortgage insurance (CHMC). If you only have 15%, then the property will cost 1.75% more. If you've got a 10% down payment, it costs 2% more, and if you only have 5% then you'll pay 2.75% more. This is an up-front cost but it usually gets tagged onto the total mortgage amount, so you pay for it slowly over the duration of the mortgage.

If you plan to sell it in a few years, you're better off with 20% down. But if you will be renting it, you may want to keep most of your downpayment money for the next property. The reason is that when you convert your principal residence to a rental, then the interest on the original mortgage becomes tax deductible. But if you were just to re-finance (in order to get the money for downpayment on a new residence) then the interest is not deductible, because the direct use of the borrowed funds is to purchase a personal property.

To learn more about buying a home, check out the CHMC step-by-step guide to homebuying.

I haven't seen 0% down lately, but look around, maybe someone is offering it. Beware of high administration fees, and of course the CMHC insurance fee.
 

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We bought our first house about eight months ago and put 5% down using the home buyers plan. I would have liked to put more down to reduce CMHC fees but that's the amount we had. Besides the downpayment, we made sure we had about $5000 set aside for all the closing costs and all the other related expenses of moving into a new house.
 

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We have a tenant in our basement, and therefore we put down as little as we possibly could, so we could use the tax deduction on our interest payments. We have a 40 year mortgage, and we were not allowed to put 0% down...I think they forced us to put over 5%, but I can't remember the exact number.

If you aren't planning on having a tenant, then you might as well try to put down 20% to avoid the CMHC charges.
 

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Just a couple of big-picture things to put some thought into:

1. I'd be cautious of buying a property with a negligible downpayment with the intent to sell in a couple of years. House prices seem to be falling in Canada. With a small downpayment, there's a real chance you could end up having a larger mortgage than your condo was worth in a couple of years. I would do some research into the relative health of the Toronto condo market, decide where you think condo prices will be in a couple of years, and then decide how much you should put down.

2. The benefit to putting down a decent downpayment is that you avoid a possible situation where you can't sell the place because it would actually cost you money to sell for less than the value of the mortgage.

We personally put 20% down on our house, and have concentrated heavily on reducing the mortgage in the 3.5 years since then.
 

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I bought pre-construction and had four years to come up with the full 25%. The first 15% was spread out over nearly two years while the remaining 10% was due at closing. i do accelerated bi-weekly with a 25% increased payment on top of that. I haven't done any lump sum yearly payments yet.

Watch out for all the additional closing costs. They add up.

I have no intention of selling though may rent it out if we get a bigger place later.
 

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I was much the same (insane - pushing 40%) down payment on our first condo. We were on track to pay it off in 5 years. We were very debt adverse (and still are - sorta).

but took on more in the upgrade to a house.

I'm surprised how easily we let ourselves break that mode of thinking - houses only go up in value right?!? :confused:
 

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I am looking at purchasing a property (condo or otherwise) as a primary residence close to next fall so by about October 2009.

My question for those of you that already own properties, is how much did you put down and what must I watch out for?

Is there a real benefit to putting a huge downpayment down if I only intend to stay there for a few years and then sell it or make it a rental property.

Does zero down stilll exist in Canada? I see ads from realtors in Toronto saying I can put zero down still...what's the deal?
A lot of good advice already.

We put 25% down a little under a year ago. If the market were to go severely down and you have little down, you will NOT be moving since you'd be owing more than the property is worth. A higher down payment helps to mitigate this.

Closing costs are killer. Many do not account for them. Try to save like crazy and have a down payment large enough to avoid the fees, but keep some back for those closing costs.

Don't forget the implicit 'closing' costs. Everyone seems to think they can 'live in an empty house for years as we save', but most are dreaming. You need to account for furnishings, drapes/blinds, and additional monthly costs associated with home ownership.

All in all though, home ownership is fun and exciting! Of course there is a ton of stress but have fun with it! Take pride in what you own and do not buy what you cannot afford (what a concept huh! :)).
 

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Discussion Starter #11
Thanks everyone for the great responses.

I think what I'm really having a problem with is that long term thinking.
I want to own something now, actually yesterday :), so have been exploring options to get me there faster, as opposed to doing it the old fashion way by saving and waiting.
 

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There are a number of fees to look out for:

Lawyer fee and expenses
Mortgage-related fees (appraisal, etc.)
Connection for utilities (phone, cable, gas, water)
Moving
Cleaning
Bringing the new property up to speed with paint, lighting, etc. if required

And pleasant things like property tax... and condo fees if you go that route.

If you have plenty of money for a downpayment, as the original post implies, why not use it, avoid the CMHC fees and reduce interest? That is, unless you firmly intend on making it a rental property in a couple of years. Then invest as little as possible, because you want to generate deductible expenses (interest on mortgage).
 

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Hi there,

Would someone be able to give me a rough estimate of closing costs for an ~250K home?

I've been hearing about 2.5%? is that correct? And what exactly does that cover?

cheers,
 

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Thanks everyone for the great responses.

I think what I'm really having a problem with is that long term thinking.
I want to own something now, actually yesterday :), so have been exploring options to get me there faster, as opposed to doing it the old fashion way by saving and waiting.
Saving and waiting isn't a bad idea. My wife and I subscribe to saving and waiting. Investors do poorly when they try to move quickly. If you had saved and waited in the stock market, you would have had a field day at the end of 2007 and well into 2008. If you wanted to get in as soon as possible, you would have likely been hurt.
 

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Hi there,

Would someone be able to give me a rough estimate of closing costs for an ~250K home?

I've been hearing about 2.5%? is that correct? And what exactly does that cover?

cheers,
It depends on what province you are from and it varies greatly. Here in NL, you have to pay legal fees ($700 for buying) + a mortgage tax. When it's all said and done, it will cost around $2500 in legal fees to buy a house. However, legal fees are lower when you sell, but then again, you may have to pay a realtor (5%).
 

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I think what I'm really having a problem with is that long term thinking.
I want to own something now, actually yesterday :), so have been exploring options to get me there faster, as opposed to doing it the old fashion way by saving and waiting.
Depending on the real estate market where you live - if the market is strong it is worthwhile to consider buying with less down if it means buying sooner, stopping paying rent sooner, and beginning to build equity.

When you make the decision to stop renting and buy a home every rent payment you make after that decision is a payment that could be going towards your equity instead of someone elses.
 

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Discussion Starter #20
I think the main goal for me is to start building equity as soon as possible not actually live on my own. Obviously that is something that might go hand in hand with buying property.

I currently do not pay rent and have very little other expenses, so I feel like I should be putting that money towards a property and rent it out if I don't move into it, in which case I get the idea that mortgage insruance is really the only major hit I would incur.

And if I was looking at a studio or 1 bdr condo in DT Toronto between 150-175K, the mortgage payment + condo fees wouldn't be too high even if i didn't have 20pc down, and especially if I had a HELOC mortgage no?
 
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