Click here to join our mailing list to receive the latest news and updates as they happen. Unsubscribe any time.

First-Time Down Payments

canadian dollar houseA wide majority of first-time buyers-to-be plan to put down less than 20%, according to new data from RBC/Ipsos.

Here’s the breakdown of their expected down payments:

  • 10% or less (62% of respondents)
  • 11-20% (26% of respondents)
  • More than 20% (12% of respondents)

Over half of newbie homeowners will likely pay the maximum default insurance premium to buy their home.* That maximum ranges from $2,750-$2,900 per $100,000 of purchase price (i.e., 2.75%-2.90%), depending on the source of down payment.

If home prices rise 2% a year (a rough rule of thumb for the long-term growth rate), buyers can easily make up that insurance premium in a few years. If prices drop, it’s just one more thing that eats into their equity if they have to sell.


How long do young buyers expect to save for their first down payment?

  • 53% say “up to three years”
  • 25% say between four and six years
  • 16% say seven years or more
  • 6% say they’ll never save enough to buy a home

Mortgage-Term-SelectionProspective first-time buyer term choices:

  • 39% prefer a term over five years
    (versus 22% of all prospective buyers)
  • 38% prefer a 5-year term
  • 23% want a term less than five years.

Of Canadians in general:

  • 14% of homeowners said they should have made a bigger down payment.
  • 29% of prospective borrowers (42% of first-time buyers) are considering a hybrid mortgage (e.g. part-fixed and part variable). But far fewer (just 7% according to CAAMP) actually choose hybrid mortgages.
  • Just 5% of homeowners admit to choosing the wrong type of mortgage. (From our experience, far more complain about their financing than 5%. Many don’t realize they’ve taken an inferior mortgage until they learn of their lender’s policy on penalties, porting, blending a rate, converting a rate and so forth. Those lessons typically come after closing, when it’s too late.)

Survey details:  These findings come from an RBC/Ipsos Reid poll conducted between January 31st and February 8th, 2013 on behalf of RBC. The sample was 3,005 Canadian adults from Ipsos’ Canadian online panel.

* This is the maximum default insurance premium for fully qualifying borrowers (i.e., those who can prove their income).

Rob McLister, CMT