BMO Financial Group

BMO Financial Group
BMO Bank of Montreal

BMO Bank of Montreal

February 28, 2014 14:05 ET

Maximize Your Down Payment to Keep Housing Costs in Check: BMO

- With the busy home buying season on the horizon, BMO offers tips for house hunters on how to build the biggest down payment possible

TORONTO, ONTARIO--(Marketwired - Feb. 28, 2014) - As many buyers begin their hunt for the perfect home this spring, BMO reminds Canadians that the first step to ensuring long-term affordability is having the largest down payment possible.

"Among the many considerations for prospective home buyers, the most important of all is building a substantial down payment," said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. "A larger down payment means the buyer will have to borrow less, resulting in lower overall housing costs."

Ms. Parsons added that a typical down payment ranges between 5 per cent and 20 per cent. Those with down payments that equal less than 20 per cent of the purchase price will need to pay mortgage insurance on their loan, which will add to their overall costs.

Ms. Parsons noted that those planning to buy a home should sit down with a financial adviser to develop a comprehensive plan that will help them reach their down payment targets and find a mortgage that suits their needs. For example, BMO's 5 year fixed low-rate mortgage currently offers a rate of 3.49 per cent and comes with a maximum 25 year amortization, allowing Canadians to pay their mortgage off faster and save in interest over the long term.

BMO offers the following tips to help house hunters build their down payment:

Continuous Savings Plan

• Put aside a sum you can afford each month automatically from your chequing account into a high interest savings account using a Continuous Savings Plan. If you make RRSP contributions, they are tax-deductible and can help reduce your income tax.

• Personal savings and other sources of income, such as bonuses or income tax refunds, can also make a big difference.

Leveraging a Registered Retirement Savings Plan

• Under the Canada Revenue Agency Home Buyers' Plan, individuals may withdraw up to $25,000 tax-free from their Registered Retirement Savings Plan to use towards the purchase of a new home.

• Those that use their RRSP in building a down payment will have to pay back the withdrawal in equal payments over 15 years beginning the second year after the withdrawal. Click here to learn more about the Canada Customs and Revenue Agency Home Buyers' Plan.

Tax Free Savings Account

• Tax Free Savings Accounts (TFSA) allows Canadians to save and invest up to $5,500 a year without paying tax on the money you earn and withdraw, making it a tax-efficient way to grow a down payment. Click here to learn more about TFSAs.

Gifted Funds

• Money you receive as a gift is eligible for your down payment provided it doesn't have to be paid back. The person gifting the funds to you will be required to complete and sign a gift letter for your lender to verify.

For information on how BMO can help Canadians plan for the purchase of a home, please visit

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $593 billion as at January 31, 2014, and more than 45,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.

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