Making a larger down payment usually results in smaller mortgage payments, and this is particularly true in Calgary's current, pricier resale housing market.

A recent study shows that making a larger down payment can significantly reduce monthly mortgage payments by lowering the overall loan amount. Many first-time buyers manage to save up a 5% down payment, but if they receive additional help from family, which is becoming more common in Calgary, it can make a big difference in reducing their future monthly payments.

The study, conducted by a national realty firm, examined the impact of larger down payments on mortgage payments in several Canadian cities, including Calgary. For example, in Calgary, where the average home price at the end of 2024 was approximately $624,000, a $50,000 down payment (around 8%) would result in a monthly mortgage payment of roughly $3,104. Calgary ranked lower than other cities, where $50,000 would cover a larger portion of the purchase price.

In Canada, to qualify for mortgage insurance, a minimum 5% down payment is required. This insurance is necessary unless the buyer can make a down payment of at least 20%. For comparison, Thunder Bay had the lowest average home price in the study at $282,000. A $50,000 down payment there would cover nearly 18% of the home’s price, resulting in a monthly payment of just $1,240.

The study also looked at larger down payments, increasing by $50,000 increments up to $250,000. In Calgary, a $250,000 down payment would cover 40% of the average home price, lowering the monthly mortgage payment to around $1,945. Meanwhile, in Greater Vancouver, where the average home price is significantly higher, $250,000 would only cover about 21% of the $1.2 million price, leading to a monthly payment of $5,009.

Some realtors advise that first-time buyers carefully consider their mortgage options before committing to a 20% down payment to avoid insurance premiums. In some cases, putting down just under 20% can secure a better mortgage rate, and buyers may also be able to arrange bridge financing to assist with the down payment.

With the spring market approaching, it's crucial for buyers to ensure their finances are in order, especially given Calgary's competitive market for single-family detached homes. The benchmark price for these homes rose 5% to $760,500 in February year-over-year.

Experts suggest that buyers should consider using the maximum amount they are approved for to purchase a home that meets their needs. Instead of buying a fixer-upper for $600,000, it might be wiser to use the full borrowing limit to buy a home that doesn’t need repairs, even if it means a slightly higher monthly mortgage payment. Everyone's financial situation is unique, but it's important not to be afraid to stretch your budget if it’s affordable.