June 5, 20263 min read
This is one of the most useful questions to answer early in the mortgage process. A larger down payment lowers the mortgage amount, but it does not always produce a lower interest rate. Canadian mortgage pricing can be counterintuitive because insured and conventional loans are funded differently.
The factors that change the answer
Here is what matters most:
- Borrowers with less than 20% down generally require mortgage default insurance when eligible, and insured loans can sometimes receive lower rates.
- With 20% or more down, you avoid the default-insurance premium but the advertised rate may be slightly different.
- At lower loan-to-value ratios some lenders may again improve conventional pricing.
- The best comparison looks at insurance premium, interest rate, monthly payment, cash retained and total borrowing cost together.
Do not increase a down payment solely to chase a rate without comparing the complete economics.
Want this applied to your own numbers?
Call Phil Cragg at 866-349-4915 or request a written comparison.
Request a rate quote