There’s a common misconception that every home purchase requires a 20% down payment. While it’s ideal to have a larger down payment as you move up the property ladder as you age, the reality is that you can still buy a home with less than 20% down – even if it’s your second, third, or fourth home.

First-Time Buyers and Mortgage Default Insurance

For many first-time homebuyers, saving up 20% for a down payment is out of reach, especially when just starting out in life. That’s where mortgage default insurance (commonly known as CMHC insurance) comes in. If you put down less than 20%, you’ll need to pay this insurance, which protects the lender in case you default on the mortgage. While it’s an added cost, it allows many buyers to enter the market with as little as 5% down.

Do You Need 20% for Your Next Home?

The misconception comes in when homeowners believe that once they’ve bought their first home, they must always have 20% down for future purchases. This is not true! You can still buy your second, third, or even fifth home with less than 20% down. However, just like with your first home, you’ll need to pay mortgage default insurance if the down payment is under 20%.

Aim for 20%

While you’re not legally required to have 20% down for subsequent home purchases, it is a good financial goal to strive towards. Avoiding mortgage default insurance can save you a lot amount of money in the long run. The more equity you build in your home and the larger your down payment, the less you’ll pay in interest and fees over the life of your mortgage. But if you’re not there yet, don’t worry—you still have options.

The Bottom Line

There’s no rule that says you must have 20% down to purchase a home, even if it’s not your first. I am here to navigate these complexities and find the best mortgage option for your unique situation. If you’re looking to get pre-approved for a mortgage to buy a property in Edmonton, fill out my online application. I’m here to help you every step of the way.

About Jason Scott, Edmonton Mortgage Broker

Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’ll be your trusted partner who will help you get the right mortgage for your family home or Investment property. I’m Jason Scott, and I’ll be your Mortgage Broker in Edmonton.