Posted by: Karim Ali

Coffee with Karim

How much should you put down?

It’s a difficult decision, and you’re probably hearing advice from all those around you. My advice is to consider how long it will take you to save up the remaining 15% to reach a total of 20% down. Read-on to see what I mean.

In the current real estate landscape, potential homebuyers are faced with a critical decision – whether to take the plunge now with a 5% down payment or patiently save until they can afford a 20% down payment. This dilemma has significant implications for the homebuyer’s finances, future, and overall homeownership experience. Let’s delve into this decision by comparing the stories of two hypothetical buyers, Muhammad and John, each facing the same choice.

Buying a $500,000 Home


Muhammad and John both have their eyes on a $500,000 home and have managed to save $25,000, not including closing costs. Ahmed decides to seize the opportunity and purchase the home today, putting down a 5% down payment of $25,000. On the other hand, John opts for a more conservative approach, aiming to save aggressively at $2,000 per month until he accumulates a 20% down payment. This saving strategy takes John approximately four years to reach his goal.

4 years later…

Now, let’s fast forward four years. With an average annual appreciation rate of 3%, the home’s value has increased to around $562,000. This sets the stage for the financial comparison between Ahmed and John.

John, having saved diligently and now ready to make his purchase, decides to put down a 20% payment on the $562,000 home. This translates to a down payment of $112,400. His mortgage balance starts at $449,600, and he faces a monthly mortgage payment of $2,744.

On the other hand, Ahmed, who jumped into the market four years ago, already has equity in his home. His mortgage balance is $435,000, and he pays a monthly mortgage of $3,015. However, it’s important to note that Ahmed has been paying $63 per month in mortgage insurance.

Time in the Market

Here’s where the dynamics of the decision start to unfold. Ahmed has been building equity in his home for four years, and his monthly mortgage payment is slightly higher due to mortgage insurance. On the other hand, John, who waited patiently to save a 20% down payment, starts with a lower mortgage balance and a more manageable monthly payment.

Now, let’s analyze the advice. The key factor in this decision is the time it takes to save for a 20% down payment. While John’s approach allowed him to start with a lower mortgage balance, Ahmed has been enjoying homeownership for four years. This time factor is crucial in determining the overall financial impact of the decision.

My Advice

Here’s my advice: consider your individual circumstances, financial goals, and your timeline for homeownership. If waiting for a 20% down payment aligns with your goals and financial strategy, it could lead to a more favourable mortgage scenario. However, if immediate homeownership is a priority, and you are comfortable with a 5% down payment, that option also has its merits.

Every homebuyer’s situation is unique, and the best decision depends on various factors. If you find yourself grappling with this dilemma, I’m here to help. Direct message me, and let’s go over your specific scenario. Whether you’re leaning towards the 5% option or contemplating the 20%, a personalized analysis can provide valuable insights tailored to your financial goals.

In conclusion, the 5% vs. 20% down payment dilemma is a nuanced decision that requires careful consideration of your personal circumstances. By understanding the financial implications and weighing the pros and cons, you can make an informed choice that aligns with your homeownership goals. Remember, the key is to find a balance that suits your financial strategy and desired timeline for achieving homeownership.


Stay tuned for more valuable tips and information on navigating the Ottawa real estate market.

Bonus tips


It’s most important you simply buy a home if and when it’s most right for you. Many will rely on their home’s equity for their retirement and/or as a vehicle of investment, but you should consider if buying a home is even right for you first.


Speaking with a professional is the best piece of advice I could give you. Each buyer’s situation is different – perhaps you’re expecting serious growth in your future income. Reach out and speak with someone you trust.

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