What $5000 Can Do For A Mortgage

RateSupermarket.ca

Even a small boost to your down payment can go a long way over a mortgage's lifetime. Read on to find out how.

For prospective home buyers looking to enter Canada's real estate market, recent conditions haven't been too welcoming. As average home prices reach record highs and recent CMHC mortgage rule changes limit affordability, would-be home buyers are faced with dire circumstances: save for decades, and be prepared to pay interest for years ( let's face it - these record low mortgage rates are not going to last forever!).

"Existing house prices have increased over $60,000 on average since 2008 – despite the low current mortgage rates, it is getting harder for Canadians to get into the real estate market," said Kelvin Mangaroo, President of RateSupermarket.ca, Canada's largest comprehensive financial products comparison website.

Every Little Bit Counts
What options do homeowners have to alleviate the financial burden of home sweet home? According to RateSupermarket.ca, scraping together an additional $5000 on a down payment, while prolonging the savings timeline, can go a long way over the course of a mortgage, resulting in thousands of dollars of saved interest and a cropped amortization.

Assuming a home is priced at the CMHC-reported national average of $368,000 with a constant fixed mortgage rate at 3.36% over a 25-year amortization, RateSupermarket.ca found the numbers break down as follows:

Growing Those Dollars
An additional $5000 smackeroos had a lasting effect on even a minimal down payment of five per cent, or $18,400 on a $368,000 mortgage. Boosting the amount paid to $23,400, a homeowner would have saved $300 a year - totaling to $7500 over the course of their mortgage.

For those able to double that initial amount, a boost added to a down payment of $36,800 not only saved $480 a year and a full $12,000 over the course of the mortgage, it also shaved a year off the amortization.

Even savvier savers with more impressive nest eggs had significant savings to gain from paying a little extra. For those hovering at the 19 per cent mark (the cutoff point for mortgages requiring CMHC insurance), pushing past 20 per cent means waving goodbye to $5216 in costly CMHC insurance premiums in addition to saving $600 per year, and a total of $15,000 over the course of the mortgage.

One Lucky Winner to Receive $5000 Down Payment Prize
While an extra $5000 may be achievable with a dedicated saving plan, it's hardly chump change for many Canadians. To ease the strain, RateSupermarket.ca is providing one winner with a $5000 cash prize to go toward their mortgage payment. Click here for details on how to enter the giveaway, which runs until November 10, 2012.