- April 16, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Considering Purchasing a House and Down Payment Strategies
Hello everyone. I am currently in the process of potentially purchasing a house in the near future. As I conduct my research and seek advice, I came across information on YouTube that suggests making a higher down payment, specifically 35% of the house’s value, can lead to securing lower and better mortgage interest rates. I am interested in knowing if this claim holds true and whether this strategy would be beneficial for me in the long run.
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Thank you for your assistance.
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****** just grabbed a
Mortgage agent here.
Some lenders have special rates when downpayment is more than or equal to 35%. This is more common in the case of monolines. The key thing to note is that it should be an owner-occupied property, with a purchase price of less than $1 million.
Yup.
Now is the difference worth it? Would you be able to have better return with investing the extra % downpayment ? I dunno, I suck at investing. But the interest difference is not THAT large. For me the difference between 25% and 35% down was less than 0.4% interest rate change. (Was one year ago I don t remember exactly)
$520k mortgage, 4.8% fixed for 5 years, 30% down.
This is only true if you meet insurable conditions, which is a purchase price under $1 million and a 25 year amortization.
I am a broker and most bank lenders are cheaper than the monoline lenders right now and they offer a discount on 25 year amortization, not on the larger down payment.
Yes it is true.
Once you hit 65% LTV, you have access to insured mortgage rates.
Yes. Downpayments at or above 35% (or below 20% because those are insured) get the best rates. 20% gives the worst rates. The differences are usually pretty subtle.
Not really tbh. This used to be the case, but recently rates are so high relative to house prices that everyone is getting around the best rate possible as long as they qualify.
No difference between 20% and 50% in my recent experience.
I think it is the opposite. I ran into negotiations specifically to this and was told straight up that I should aim for a bigger loan to get better rate. Makes sense when you think what is the interest of the bank, they love to loan out fictive money, the more, the better!
I was told the opposite, the less you borrow the higher the interest rate
Not necessarily, my understanding is that CMHC insured mortgages come with lower rates and thus a down payment under 20% may actually lead to a lower rate
>I heard on YouTube
Let’s assume that’s not accurate right form the start.
The mortgage rate difference is if the mortgage is insured or not from CMHC. If insured (under 20% down) then you can get a bit better rate but have to pay CMHC insurance.
But each lender has their own internal requirements.
It’s probably easier to secure a lower interest (as they always have wiggle room and someone with that much capital is always someone the banks is willing to give money to) but I highly doubt it makes a noticeable difference. Like I’d be willing to think if you saved that extra 10% down payment and kept it in an investment it could grow faster than what you’d make off having a 5.05% rate instead of 5.15%.
I welcome someone to attempt the math on that though 😂
The only thing that matter is how much you are borrowing.
If youre borrowing 65% on a 1.3M house at today’s rates, that is still going to cost you around 8k a month with about 5k of that going to interest. Can you afford that?
35% is a general rule of thumb that really doesnt apply in today’s housing market and salary market anymore.
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