Is putting twenty percent down always better?
No. Twenty percent avoids the insurance premium and its sales tax, but insured mortgages are often priced below uninsured ones, and draining your reserve to reach twenty percent is a trade you should price rather than assume.
Three things move in opposite directions when you cross twenty percent.
You stop paying the insurance premium and the Ontario retail sales tax on it, which is a real saving. You typically lose access to insured rate pricing, which is lower because the lender's risk is covered, so your rate may rise. And you have less cash left, which matters because the first year of ownership produces expenses.
There is also a maximum amortization difference: insured mortgages are capped shorter than uninsured ones, so twenty percent down can buy a lower payment through a longer amortization even at a higher rate.
Run both. The gap is frequently small, and the deciding factor is usually how much cash you want left the day after closing.
What it depends on
- the spread between insured and uninsured rates on the day
- your amortization
- how much reserve you would give up to reach twenty percent
Answer it with your own numbers
You will need: purchase price, both down payment amounts, rate for each.
Compare the two side by sideNext questions
What is mortgage default insurance and who does it protect?
It protects the lender, not you. It is required below twenty percent down, the premium is added to your mortgage, and in Ontario the retail sales tax on that premium is cash you pay on closing.
Canada-wide
Should I make extra mortgage payments?
Usually yes, and earliest is best: in the first years almost every extra dollar goes to principal, so a prepayment then removes a large multiple of itself in future interest. Pay off higher-rate debt and build an emergency fund first, and stay inside your annual privilege limits.
Canada-wide