Saving for a larger down payment really pays off

Posted on Posted in Money and Financing


(NC)—When you’re buying a home, starting with a large down payment can really pay off. Sometimes saving for a large down payment means postponing your purchase, but the long-term benefits can be worth the wait. Farhaneh Haque, director of mortgage advice at TD Canada Trust, explains some of these benefits:
Pay less interest:
The larger your down payment, the less money you borrow to finance the purchase of your home, so you’ll likely pay back the loan sooner, paying less interest in the process than with a smaller down payment. Additionally you may qualify for a lower interest rate because your loan-to-value ratio will be higher (meaning the amount you borrow compared to the value of your home), which your lender will look favourably on.
Avoid additional costs:
With a down payment greater than 20% of the purchase price, you can avoid having to pay for mortgage default insurance, which generally ranges from 0.5% to 2.90% of your mortgage principal amount.
“Over time the financial benefits of a larger down payment are significant. By saving diligently, you can pull together a sizeable amount in less time than you may think,” says Haque. “According to recent TD Canada Trust research on homebuyers, two-thirds said it took them less than four years to save up a down payment of 10% to 20%.”
There’s more information on how to start saving for a down payment and prepare for homeownership available at