Today we are going to answer the question, “How much cash do you really need to buy your first home?
So let’s dive right in. We’ll explain a bit about the number one thing you will need to save for in order to buy a home – a down payment.
So it’s fairly obvious that you need a down payment to purchase a home, but many people don’t know how much you need. That answer really depends on your lender and also if you want to avoid paying the Canada Mortgage and Housing Corporation (CMHC) mortgage default insurance. If you can come up with a 20% down payment then you can avoid paying that insurance. However, 20% down is a lot for most first time home buyers so most will typically lean towards 5% down. This means on a $200,000 mortgage your down payment would be $10,000.
Another cost to purchasing a home that most buyers do not factor in are the closing costs. Closing costs include everything from legal fees to title insurance to paying a home inspector. We believe that closing costs can amount to approximately 3% of the purchase price. So sticking with the example of a $200,000 mortgage, that would put your closing costs at around $6,000.
In summary, with a 5% down payment and approximately 3% for closing costs, a buyer looking to purchase a $200,000 home would be wise to save about $16,000. Of course, if you’re curious and want to learn more about this topic, any of our team members here at Realty Executives Gateway in Melfort, would be more than happy to give you their advice.